Business loans for women

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Page written by Chris Godfrey. Last reviewed on October 9, 2024. Next review due October 1, 2025.

Females make up more than 50% of the US population, but only 39% of US businesses are currently owned by women. A lack of funding for female entrepreneurs to support start-ups, fuel expansion plans, and buy property and equipment, is named as a key reason business ownership by women is so low. Fortunately, this situation is changing, as more independent providers are joining the US business lending market and making more funding available for women entrepreneurs to close the gender-finance gap.

But what kind of loans can female business owners obtain? Where can they get them? And how do they choose the best loan for their organization? Read on to find out more.

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Challenges women face in business financing

It’s seldom easy to launch or grow a small business, but female entrepreneurs typically face additional challenges in their quest for business success. Common problems include.

Limited access to capital – it’s a regrettable fact, but the truth is, some lenders, venture capitalists and private investors still harbor unfounded negative bias towards female business owners – in 2022, 25% of women had their loan applications denied, compared to 16% of men
Reduced access to commercial networks and opportunities – from school and college to clubs and business communities, men typically build deep contact networks over their careers – relationships that can give access to business opportunities further down the line. In comparison, many women suffer career breaks to raise a family, which can stunt or even sever their networking capabilities and reduce their access to commercial opportunities
Childcare responsibilities – despite recent advances in parental care and a greater sharing of childcare responsibilities between men and women, women remain the principal child carers in the US. Extended leave to have children, and split business/home responsibilities that take time and focus away from work, can limit the success of female careers and unevenly impact the performance of women-owned businesses
Subtle societal prejudices against female business owners – see the first point above, low volume bias towards women in business can act as an anchor against their entrepreneurial success

Overcoming these impediments is crucial for the nation’s economy and for the continuing rise in US living standards. Why? Because according to Wells Fargo Bank, female-owned businesses have the highest potential for significant economic growth. Here’s a sample of what this means:

From 2019 to 2023, women-owned US businesses’ expansion rate outpaced the rate of men’s by 94.3% for the number of firms, 252.8% for employment, and 82.0% for revenue.
Nearly half a million women-owned businesses with revenues between $250,000 and $999,999 grew their aggregate revenues by about 30%.
Between 2019 and 2023, Black/African American women-owned businesses saw average revenues increase 32.7% and Hispanic/Latino women-owned businesses 17.1% compared to all women-owned businesses’ 12.1% rise.

Where can women get small business loans?

Female business owners may obtain small business loans from many of the same sources as their male counterparts – banks, credit unions, online lenders, private investors, etc. It is worth noting that due to the Equal Opportunity Credit Act, lenders cannot approve or deny any loan application based on gender, race, color or religion, and that US lenders have a legal obligation to ensure that women-owned businesses have access to the same resources and funding opportunities as male business owners.

Are there business loans specifically for women?

It is illegal for US lenders to provide funding based on gender, race, religion or color. As a result, there are no business loans reserved only for women. However, some alternative financing solutions, such as small business grants for women, may be available solely for female entrepreneurs or minority business owners. Check the funding options below to find out more.

Types of small business loans for women

Business loans for women come in all shapes and sizes. Some finance may be obtained without security, whilst others may require the borrower to provide sufficient collateral or at least a personal guarantee.

Popular forms of business finance for women:

Term loans

The most common type of business loan. Term loans are typically used for one-off investments where you know exactly how much cash you need. Commercial real estate purchases, plant and equipment investment, and debt repayment and restructuring activities work well with this kind of loan. You receive a single, lump-sum cash injection and then pay it back in regular instalments, plus interest and any fees, over a fixed period of up to 25 years.

Business lines of credit

A business line of credit functions like a high-value credit card but comes with lower interest rates and fees. Female business owners can withdraw as much as they want when they want from a loan facility up to the limit of their borrowing. Interest rates are usually fixed, and businesses may repay on a set or flexible schedule. This kind of loan is ideal for organizations that want maximum flexibility or for investment situations where the total cash required is unknown. However, expect the lender to request regular financial updates and increased cashflow monitoring as part of the deal.

Working capital loans

Working capital loans provide cash to fund a company’s day to day operating expenses. They are short-term debt instruments and not used for long-term debt or investments such as the purchase of plant or property. Working capital loans are typically paid back within a year or less and they are useful because many businesses have income that varies throughout the year. This is especially true of businesses that sell seasonal goods or services, where they have brief periods of high sales and prolonged periods when sales are slow.

Equipment loans

Buying big ticket machinery and equipment can put a major dent in cashflow, but equipment loans can pay for new plant and machinery without causing financial stress. Equipment loans are ‘self-collateralizing’ – they use the asset you’re financing as security, similar to a car loan or a residential mortgage. Once the loan is approved, the lender sends the funds to the equipment vendor, who then delivers the machinery. You use the equipment as you pay for it and the lender maintains a lien on the title to the machinery. Once you pay the loan back, the lender releases the lien, and you own the equipment outright.

Invoice financing

Also known as account receivables financing, this type of loan allows you to borrow against the value of your unpaid invoices and is best for B2B organizations. The lender will usually provide up to 95% of the invoice value within a few days or even hours of the bill being raised. You may still be responsible for collecting the cash from your clients, or the lender (also known as the ‘factor’) may collect on your behalf. If you collect, you must repay the lender on their schedule. If they collect, they will take back their advance from the client’s payment and then pass any residual sum (after charging interest and fees) back to you.

Merchant cash advances

Available for businesses that accept customer payments by credit and debit card. A merchant cash advance allows you to borrow against the value of your card sales. As your card sales increase, your borrowing limit goes up. Pay the loan back with a fixed percentage of your card sales on a daily, weekly or monthly basis. Your sales act as security for the loan, no added collateral is required.

SBA loans

Standards SBA 7a business loans are provided by banks, credit unions and online lenders who are part of the Small Business Administration (SBA) lender network. Partially backed by the US Government, these loans can provide up to $5million to qualifying borrowers with repayment terms as long as 25 years.

SBA loans usually come with much lower interest rates and fees than other commercial lending but meeting their strict rules of eligibility can be tough for many businesses. As well as an approval process that can take several months, organizations will typically need to have been in business for at least four years and have annual revenues over $180,000. Your personal credit score must be at least 680.

SBA Microloans and Community Advantage loans

Nonprofit and community-based lenders can provide SBA Microloans and Community Advantage loans for businesses that struggle to secure standard business loans of $100k or less. These types of SBA loans are ideal for underserved communities, including women, veterans, minorities, immigrants and refugees.

SBA Microloans are available up to $50,000 and can usually be secured with FICO scores as low as 500, or even with no credit score at all. However, they often require collateral or a personal guarantee that makes you personally responsible for the debt, not your business. Community Advantage loans function much like regular SBA 7a business loans but come with a maximum of $350,000 and other features that may make them easier to secure.

How do I apply for a women's business loan?

Interest rates and fees for business loans can vary significantly, so it makes sense for female entrepreneurs to shop around before settling on a deal. You can do this by approaching banks, credit unions and online lenders one by one, or you can use the services of a loan marketplace that will introduce you to a choice of loans from a range of different lenders. Some marketplace platforms can also give you advice and help you with the loan application process. This can be especially useful for female business owners who have never taken out a business loan before.

Can women get business loans with bad credit?

Yes. Even if you have bad credit or no credit it may still be possible to obtain the funding you need. Learn more about bad credit business loans here, or contact Swoop today to find out how female business owners can get the financing their business deserves even when they have bad credit.

How to choose a business loan for women

Few business loans are alike. Female entrepreneurs should compare the key features of different loan offers when picking the best business loan for their business:

Interest rate: The amount of interest you will pay on any business loan will vary by lender, type of loan and your credit profile. Rates may be variable or fixed, while some lenders will charge a factor rate instead of an APR or interest rate. Use a loan calculation tool to compare actual costs before accepting any deal
Lender fees: Watch out for extra charges such as origination fees, late charges or early repayment penalties – all of which can increase a loan’s total cost
Repayment term: Loan repayment terms can range from a few months to 25 years, with either daily, weekly or monthly payments. Be sure your business budget can handle the repayment schedule
Time to fund: While same-day business loans can help during financial emergencies, fast loans usually come with higher rates and less flexible terms. If you can afford to wait, you’ll generally receive more competitive rates and terms. Be aware that traditional lenders can take up to two weeks or longer to approve and fund your loan, while SBA loans can take 90 days or more
Collateral required: Some lenders offer secured loans, where you must provide collateral to reduce lender risk. Collateral will typically be hard assets such as real estate, inventory, or plant and equipment. If you default on the loan, your provided collateral may be seized and sold by the lender
Loan purpose: Depending on the loan type and lender, there may be restrictions on how you can spend your loan funds. For instance, you can’t use an SBA microloan to pay off existing debt or purchase commercial real estate

What are the alternative small business financing options for women?

As well as the small business loans detailed above, there may be other ways for women to obtain business financing:

Women’s small business grants

Small business grants can be an excellent way for female entrepreneurs to fund their business ambitions. Unlike commercial loans, grants are free money – they do not need to be repaid – and credit scores and many of the usual requirements of commercial lending do not apply.

Top business grants for women:

Crowdfunding

Available via various online platforms, crowdfunding can bring in large sums if your presentation hits the right spot. Although it’s not easy to raise business financing in small donations from hundreds of donors, this cash is essentially free as there is no interest to pay and you do not need to repay the money if you spend it where you said you would. An eye-catching idea and a powerful pitch is essential to succeed with this funding option.

External investors

If you’re seeking outside investment, there are networks of venture capitalists and angel investors readily available online. Bringing in external investment can give you the cash you need, and it may also deliver a unique and extra set of skills and contacts that can help your organization grow even faster.

Note that investors will usually want a piece of the action in exchange for their money. This will mean you giving up a share of your ownership and may loosen your overall control of the business. Some investors may also want higher dividends or royalty payments as well as their share of equity. Venture capitalists and angel investors are also notoriously picky about the businesses they choose to back. You could spend many months pursuing one lead after another before you find the right match.

Get started with Swoop

No matter if you’re a female business owner seeking your first business loan or you’re a seasoned borrower, working with business finance experts can make all the difference when applying for funding. Contact Swoop to discuss your borrowing needs, get help with your application and to compare high-quality business loans for women from a choice of lenders. Give your business the financial support it deserves. Register with Swoop today.

Written by

Chris Godfrey

Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Wells Fargo Bank, Visa, Experian, Ebay, Flywire, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of US consumer and business finance.

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