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Small Business Loans for Women

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Contemporary women have forayed into all areas that were earlier considered a male bastion. A survey points out that women-owned business have mushroomed in the past years and many of these women entrepreneurs have been successful in their area of business.


Women business loans make available the working capital required for the business run by women. Women who take loans to run their business should choose loan programs that offer flexible terms. Business loans are granted for women who own businesses of crafts, entertainment, photography, brokerage, bed and breakfasts, pet supplies, consulting, greeting cards, catering, real estate, online businesses, etc.


Loans for women entrepreneurs are granted for business enterprises where women are majority shareholders, and also where the business is run by one or more women. Business loans can be utilized to purchase inventory/machinery or to improvise or expand the existing facility. Business loans for women can also be used for marketing the business and its products or services in the market. The working capital is usually generated as either debt or equity financing.


Understanding women business loan types


A business loan for women is just like any other business loan. Loans from the Small Business Administration and equity investments are the main sources. Other sources from where loans can be obtained are merchant account advances, invoice factoring, etc. These lending resources offer programs for private or government funding, or a combination of both.


Types of loans


The two main loan categories are government loans and conventional loans. These conventional loans can be further subdivided into conforming and non-conforming loans.


Conforming loans: These loans are controlled by definite terms and conditions like credit and income qualifications, maximum loan money, down payment requirements, etc.


Non-conforming loans: These loans are not controlled by any terms and conditions. The large loans are called Jumbo loans and the small loans are well-known as sub-prime loans.


Under government funding, the two major types of loans are FHA and VA loans. The terms and conditions for government loans are different from other loan types. Details about the exact business needs will decide whether or not the loan can be sanctioned.



Utilizing business loan for women


To invest in inventory and necessary machinery: Additional inventory or machinery can help in improving the production and expanding the business, business loan for women provides the funds required to purchase the above mentioned.


Implementing new ideas, products and service: A business loan can help the organization implement new ideas, products and services thus increasing profits


Improving production and sales: Business loans can offer the additional funding to increase the productivity of the business thus generating more profit. This additional funding can retain and improve the competitiveness of the organization.


Women business loan aspects


Consider the following aspects before settling in a for women business loans


  • Choose and settle for the right lender, analyze the bank or the financial institution from where you will be borrowing the money.

  • The loan should be used only for the business and personal credit should not be combined with business credit.

  • Utilize the loan to purchase only necessary things.

  • Work out on the monthly installments that you should pay, ensure you do not borrow too huge an amount as loan as you may find it difficult to repay the same.

  • Choose the right loan tenure; do not choose a very long tenure or a very short tenure loan.


Small business loans for women


A study shows that in the United States, women-owned small businesses provide employment for more than 27 million people and contribute over three and a half trillion dollars towards the economy. Such women involved in small businesses should be duly encouraged though appropriate funding programs.


Small business loans help women to either start a new business or provide funds to improvise the existing business. These loans are primarily aimed at women entrepreneurs who own a small number of assets and generate modest profits and earnings.


To avail a small business loan, the applicant should provide a complete financial plan. The existing business is considered as security against the loan availed. Few banks/financial institutions insist that the applicant should have owned the existing business for at least a minimum of two years. Few banks insist that the business should be completely owned by the woman applicant or the business should have a majority female ownership. Examples for small business loans for women are small business loans for minority women and government small business loans for women.



Types of small business loans for women


  • Loans backed by the Government would be a great option.

  • Advances can be borrowed by women to fund home-based projects. There are various options for this kind of funding.

  • There are few private lenders who take money to provide funds for women entrepreneurs.

  • The local Small Business Association (SBA) is the right place to begin the hunt for small business loans for women. SBA offers information and assistance to start a small business.


SBA loans for women who own small businesses


If women who own small businesses are unable to take loans from banks or financial institutions, they can approach the Small Business Administration (SBA) in their locality. The SBA acts as a guarantor for the loan applicant and repays the lender if the borrower defaults payments. To get a SBA loan guarantee the applicant should produce:


  • The application should carry a proof that the applicant could not avail a loan from any other resource and this loan will profit the business.

  • The applicant should also prove that his/her personal financial resource is not sufficient to cover the loan amount

  • The past financial statements of the business

  • The future economic projections of the business

  • Confirm the ability to repay the loan

  • Capacity to acquire more loans should be revealed

  • The applicant should not attempt to borrow finance from any other financial resource

  • Any form of collateral should be furnished

  • Taxes should have been paid correctly


Small business loan for women - factors to be considered


Credit Score and Credit Report: The loan applicant's credit score and credit report is imperative while applying for a loan. These scores are available online. In addition to the above, banks/financial institutions evaluate the applicant's experience, personality, and dependability.


Choose options between equity financing and debt financing: The applicant should decide between equity financing and debt financing while opting for a loan. If the business has a high percentage of equity when compared to debt, the applicant should choose debt financing. In case the business has a high percentage of debt when compared to equity, the applicant should choose for equity financing so as to increase the ownership capital.


Debt -equity proportion: The debt-to-equity ratio of the business is very important while applying for a loan. The applicant should understand the correlation between dollars borrowed and dollars invested in the business. If the applicant, who is the owner of the business, has invested more capital in the business, she can get more finance as loan.


Small business loans for minority women


Small business loans for minority women are granted for women who belong to a racial minority. Loans set aside for business development for minority women can be availed through this scheme. Government organizations are the key supporters of such activities.


Minority women can get a loan for their business provided it is profitable and run by trained people. A clear-cut brief business plan should be produced to the loan provider to avail this loan.


The terms and conditions for minority women borrowers are flexible. Loans can be acquired under special circumstances but the borrower is legally responsible to repay the loan amount along with the interest within the stipulated period. The maximum loan amount that can be borrowed for a small business run by minority women is USD 750,000. The SBA usually guarantees 75% of the loan amount (if the loan is borrowed through the SBA).


Minority women-owned professional, retail or service firms that has a revenues less than $25 million based on the industry are eligible to apply. Minority women-owned wholesalers, manufacturers, or distributors based on the industry



Small business loans for minority women providers


  • A special federal agency called the MBDA (Minority Business Development Agency) was created to encourage business of minority women-owned businesses. The MBDA is associated with various funding centers like the Native American Business Development Centers and Minority Business Development Centers across the nation. These centers assist minority women entrepreneurs by providing them special assistance in business plans, management strategies, marketing, financial planning, etc. Small business loans for minority women can be procured through special agencies for business ventures.

  • A number of minority business loan programs are available in the United States. Local small business development centers can help women entrepreneurs by giving them the required assistance in formulating a business plan or any other business-related concern. When traditional lenders deny giving loans, such small business development centers grant loans for minority women.

  • The Small Business Administration (SBA) also assists in funding small businesses run by minority women. They do not lend money directly but provide guarantee for the loan borrowed.

  • Apart from banks, small business investment companies also offer business loans for minority women.

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