If you’re a woman looking to start or grow your own business, a small business loan may be the boost you need.
Below, you’ll find information on small business loans for women, getting certified as a women-owned small business, applying for a loan, and alternatives to business loans.
8 Types of Small Business Loans for Women
With so many options, ranging from Small Business Administration loans to merchant cash advances, it can be challenging to know which type of financing is right for your business. We’re here to help.
Check out the different types of business loans for women so you can choose the option that meets your business’ needs.
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1. Business Line of Credit
What is a business line of credit?
Like a personal credit card, a business line of credit gives you access to a set amount of money ($50,000, for example), but you only pay interest on the amount you use.
Typically, you can withdraw and repay as needed if you don’t go over the approved credit limit.
Each creditor has its own way of determining approvals, credit limits, and interest rates. A few factors that might be taken into consideration include:
• Your business credit rating
• Your personal credit score
• The amount of time your business has been running
• Your business revenue
• Your business plan
Why choose a business line of credit?
A business line of credit may be a good option for business owners who want cash readily available for unexpected expenses, smaller purchases, or short-term financing.
This funding method offers a balance of flexibility and control so you can spend as you need to and repay only what you use (plus interest).
Keep in mind
Typically, lenders want prospective borrowers to have a strong credit and revenue history. However, if you’ve been in business for only a short amount of time and haven’t built up your credit, you may find it easier to qualify with an online lender as opposed to a bank or credit union.
Online lenders typically have less strict approval requirements, but may also have higher interest rates and lower credit limits.
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2. Term Loan
What is a term loan?
A term loan allows you to borrow a set amount of money and then pay it back with interest on a predetermined schedule.
Why choose a term loan?
Term loans can be a great option for women-owned small businesses in need of a large sum of money. Term loans give you the flexibility to use the funds for any part of your business and pay the money back over a term that fits your company’s growth.
With long-term and short-term options, you can decide what is realistic for your business needs.
Long-term small business loans often have lower monthly payments, but you may end up paying more over the loan’s lifetime because of the accrued interest over the extended repayment period.
Short-term small business loans may result in higher monthly payments, but you’ll likely pay less in interest because of the shorter repayment period.
Keep in mind
Both banks and online lenders offer term loans. While banks typically offer lower annual percentage rates (APRs) for their customers, it can be challenging to get a term loan from one if your business is brand new or if your credit rating is low. Additionally, banks frequently require some form of collateral in case you default on your term loan.
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3. SBA Loans
What Is an SBA loan?
The U.S. Small Business Administration (SBA) guarantees small business loans for women that are offered by banks and other approved lenders.
An SBA loan for women may provide lower interest rates, flexible terms, educational opportunities, and business counseling for those who qualify.
You can apply for amounts from $500 to $5 million and use the capital for nearly any business purpose, depending on the type of loan. Here are some loans that women-owned businesses might be interested in:
• SBA 7(a): SBA 7(a) loans are small business loans for women with established businesses. Financing is up to $5 million for almost any business-related purchase, including property.
◦ Additional options include an SBA 7(a) Small Loan (up to $350,000) or an SBA Express loan, which has a turnaround time of 36 hours for qualified applicants.
• SBA 504: SBA 504 loans are used to purchase new or existing buildings and land, renovation of existing property, new construction purchases, or refinancing of debt related to the expansion of your business.
Why choose an SBA loan?
SBA loans may offer lower interest rates and longer loan terms compared to other lending options. They may also allow higher borrowing amounts that can be well-suited for larger purchases.
So, if you’re looking to grow your women-owned business and have a strong credit history, an SBA loan may be a great option.
Additionally, if you’re a veteran, the SBA offers many resources and funding options to help get your business up and running. If you qualify, when comparing your choices, make sure you also evaluate small business loans for veterans.
Keep in mind
Qualifications for an SBA loan can be stringent and the application process long and difficult. If you need funding fast or don’t have the strongest credit, this might not be the optimal choice for you.
4. Commercial Real Estate Loan
What is a commercial real estate loan?
A commercial real estate loan funds the purchase of a building intended for use as office space, a retail shop, or any other commercial function.
Why choose a commercial real estate loan?
If you’re growing your business and need more space or you’re expanding into the retail sector, a commercial real estate loan may be an option to consider.
Keep in mind
Commercial real estate loans can look different depending on the lender and the property’s value.
How much financing you receive depends on the loan-to-value (LTV) ratio, which is the size of the loan compared to the value of the property. For example, if you purchase a building for $200,000, you may receive $150,000, or 75% of the total value. The remaining amount needs to be self-funded and acts as a down payment.
In addition to the down payment, you may encounter appraisal, inspection, and local filing fees. It’s a good idea to speak to your lender about the fees and additional expenses to expect so you can accurately gauge whether a commercial real estate loan is right for your needs.
5. Equipment Loan
What is an equipment loan?
Equipment loans offer to finance the purchase of machinery, vehicles, or other business-related equipment. The equipment you’re buying serves as the collateral on the loan.
Why choose an equipment loan?
Both new and established small businesses can benefit from equipment loans. If you need equipment but don’t have the capital to purchase it outright, equipment financing may help.
Keep in mind
These may be helpful small business loans for women who have bad credit, since the equipment acts as the collateral. However, it’s essential to try to make sure your loan term isn’t longer than the equipment’s useful life.
If you’d rather not take out a loan, there are also options for equipment leases.
6. Personal Loan for Business Use
What is a personal loan for business?
Personal loans are based on your personal credit history and may provide funding for your business.
Why choose a personal loan for business?
Personal loans for business may help you obtain startup capital. If you don’t have business credit established but have good personal credit, a personal loan may be a good option.
Keep in mind
Personal lenders may have restrictions on what you can use the money for, including stipulations about business expenses.
Unsecured personal loan amounts are typically smaller than loans secured by collateral, so you might need to combine a personal loan with other financing to make large purchases.
Recommended: Business Loan vs. Personal Loan: Which Is Right for You?
7. Invoice Financing
What is invoice financing?
Invoice financing uses your unpaid invoices as collateral for a cash advance.
Why choose invoice financing?
If you have a business-to-business (B2B) service with irregular billing cycles, invoice financing can help pay for operating expenses as you wait for your customers to submit payments.
A lender advances you a percentage of your outstanding invoice amounts. You can use that money to reinvest in and grow your business more quickly than if you’d waited for your customers to pay.
Keep in mind
If you operate a business-to-consumer (B2C) service, you typically don’t invoice customers and won’t qualify for invoice financing.
Additionally, lenders often charge non-refundable processing and repayment fees for invoice financing.
Finally, if your customers are late on invoice payments, you’re still responsible for paying the weekly fee associated with the invoice amount that hasn’t been paid back yet.
8. Microloan
What is a microloan?
Microloans are usually offered at $50,000 or less by nonprofit organizations and peer-to-peer lenders.
Why choose a microloan?
Microloans can be great options for any business that needs to borrow a small amount of money. In addition, they can be ideal small business loans for women with bad credit.
Because many microloans come from mission-based lenders, you may be able to get specialty funding, such as small business loans for minority women and other underserved communities.
Keep in mind
Compared to the other lending options, microloans may be easier to qualify for, but they also may carry higher interest rates. Learn more about microloans for women.
Get Certified As a Women-Owned Small Business (WOSB)
Anyone can apply for small business loans, but if you want to apply for a business loan specifically designed for women, you must become certified as a women-owned small business (WOSB).
As a certified WOSB, you can compete for government contracts set aside for specific demographic sectors, including women.
The two options for certification are self-certification and certification through an SBA-approved third party. Both options require you to use certify.SBA.gov and have a profile on SAM.gov.
Eligibility requirements for the women’s contracting program are:
• Your business must be small.
• Your business must be at least 51% owned and controlled by women who are US citizens.
• Women need to be responsible for your business’s day-to-day operations and making long-term decisions.
For more information on government contract awards for women-owned small businesses, refer to the Office of Government Contracting.
Applying for Women-Owned Small Business Loans
Applying for a small business loan for women is like applying for any other small business loans, except you have opportunities to apply for ones exclusively reserved for women.
While applications vary by lender, here are steps you can generally expect to follow when applying for a loan for women entrepreneurs:
1. Become certified as a women-owned small business, as detailed above. Again, this is only needed if you’re applying for a small business loan geared specifically toward women. If you’re applying for a general small business loan or line of credit, you do not need to become certified.
2. Consider the specific need(s) your company has and why you need the loan. Some lenders may want to know how you plan on using the money and may request a business plan.
3. Research types of business loans for women, including short- and long-term business loans, business lines of credit, commercial real estate loans, equipment financing, SBA loans, and more.
4. Investigate your business and personal credit histories to help determine what you may qualify for. Those with strong credit profiles will most likely qualify for the best rates.
5. Research types of lenders who offer your chosen loan type. Options to consider include:
• Online lender
• Bank
• Credit union
• Peer-to-peer network
6. Compare small business lenders. Ensure you meet their minimum qualifications for borrowers and check to see if they offer special programs or perks for women small business owners. Then, look for those that offer loans with the amount, rates, and terms you desire.
7. Prepare any appropriate documentation those lenders need, like bank statements, legal documents, business expenses, and tax returns.
8. Apply with the lender(s) that are a good fit for you. Ideally, you’ll prequalify with a variety of lenders and then fully apply to the one(s) that fits you best.
Alternatives to Loans: Small Business Grants for Women
Women-owned small businesses can also obtain funding through grants for women. In contrast to small business loans for women, most grants don’t need to be repaid, which is especially helpful for small business startups.
However, getting grants can be competitive. As you begin your search for grants, here are a few options to consider:
• State and local grants
• Nonprofit grants
• Grants offered by private organizations
You may need to explore a mix of grants and loans to meet the goals of your business.
If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.
FAQ
How do you apply for a small business loan for a woman-owned business?
Think about your business’s specific needs and how much money to apply for. Decide which type of loan and lender aligns with your business’s needs and qualifications. Compare lenders, then prepare documentation and submit an application to your lender(s) of choice.
Are there small business loans for women with bad credit?
Lenders have different eligibility requirements that may factor in both your personal credit score and your business’s credit. Borrowers with bad credit may want to consider microloans, which tend to have less stringent eligibility requirements. Alternatively, women with bad credit can look into small business grants, which don’t have to be repaid.
What are the benefits of small business loans for women?
There are many benefits that small business loans can offer women business owners. Depending on the type of funding you choose, you may be able to quickly get the capital needed to buy or upgrade equipment, purchase property, or get cash advances on unpaid invoices. With different repayment schedules, you can finance your business and pay back your loan on reasonable terms.
Is it easier to get a loan as a woman-owned business?
It’s not easier or harder. Lenders will look at the financial history of the business and the individual when making a lending decision.
Can women get a small business loan?
Yes, women can get a small business loan from banks, credit unions, and online lenders. To qualify, women will have the same requirements as anyone else applying for a business loan, which usually include a strong credit history and consistent business revenue.
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