7 best types of small business financing for women
Finding the right kind of lender is key to getting funding that fits your business’s needs. These categories work with a variety of small women-owned businesses, although very few have specific programs for female entrepreneurs.
SBA loans
The Small Business Administration (SBA) offers a variety of loans and loan programs. While they are typically available through banks and credit unions, online lenders like Newtek work with the SBA.
The most common SBA loan programs are 7(a) loans, Express Loans, 504 loans and microloans. These are meant to cover small business expenses and gaps in cash flow. But to qualify, you will need to have strong personal credit. In many cases, you should also expect a long application process. It may take weeks to complete a single application and months for your lender and the SBA to review your details.
If you’re interested in an SBA loan, we have compiled a list of SBA resources to make funding your business easier.
Microloans
Microloans are small-dollar loans and come with some of the lowest rates available to small business owners. Most microlenders are community development financial institutions (CDFIs) or other nonprofits. Many, like Grameen America, also have programs tailored to women-owned businesses and are willing to work with those with bad credit.
As the name implies, microloans are usually under $10,000. They’re ideal for covering small initial costs like buying a web domain and purchasing inventory. To get the most out of your microlender, look for one that offers mentorship programs to women business owners.
Online loans
Online lenders offer a broad range of options, including term loans, lines of credit and equipment loans. They can be a quick and easy way to obtain financing for any business owner. And while algorithms aren’t free from bias, an FDIC study found that compared to human underwriters, online lenders tend to charge lower rates and approve more applications from groups that face lending discrimination — especially women of color.
As with most options, there aren’t specific loans for women. Provided your business qualifies, you may be eligible for funding. Go with an online lender when you need financing as soon as possible. Lenders that specialize in financing for women-owned businesses are often slow — think a few weeks or a month.
In addition, the SBA microloan program can help your business access more affordable rates for loans up to $50,000 and is available to startups.
Short-term loans
Short-term business loans include merchant cash advances, invoice financing and small-term loans. These are designed for businesses that need to cover gaps in cash flow and usually use credit card payments or invoices as collateral.
There are rarely specific short-term loans intended specifically for women business owners. Provided you meet the minimum requirements set by a lender, you could receive quick financing for your business. Just be aware of the high cost of short-term lending and repayment terms.
Startup loans
For women with new businesses, startup financing can mean the difference between getting off the ground and closing down. But first things first, know that startup loans typically require at least six months in business and an annual revenue of $100,000 or more. For businesses younger than that or with a lower annual revenue, you’ll want to consider microloans or some of the alternatives we review.
If your business meets the most common business loan requirements, you could have access to funding that supports your startup. Microlenders that offer startup financing specifically work with women business owners, though the amount you can borrow is limited.
Other lenders, like Seek Business Capital and Guidant Financial, don’t have programs exclusively for female entrepreneurs. But they have well-rounded options to help you finance the initial expenses startups face.
Inventory financing
Businesses that deal in large amounts of inventory — especially e-commerce businesses — can receive special financing to buy inventory from wholesalers and manufacturers. This can help you meet demand without damaging your cash flow. And interest rates tend to be competitive since the lender will use your inventory as collateral for the loan.
Equipment loans
When you need a specific piece of equipment, lenders often financing backed by the equipment you’re purchasing. These have one of the highest approval rates compared to other types of business loans, since the collateral is built into the financing.
Equipment leases are also available, so you can upgrade when needed. This helps postpone the cost of getting started or upgrading what you have — which is especially useful for women in fast-paced industries.
Where to find additional funding
Established women-owned businesses aren’t limited to microloans, online lenders and short-term loans. Like any business, you have a wide range of options to support your growth and cover your expenses.
Banks and credit unions
Banks and credit unions are the most traditional choice for financing an established business. Female entrepreneurs can take advantage of some of the most competitive rates while building a positive banking relationship. However, you and your business will need strong finances to qualify.
CDFIs
Community development financial institutions, or CDFIs, are nonprofit lenders that aim to serve women and other groups that traditional financial institutions underserve. And like banks and credit unions, you’ll find the most common types of business financing options, including term loans, equipment financing, lines of credit, SBA loans and commercial real estate loans. These lenders also tend to have lower time-in-business requirements, and you might not need to be profitable to qualify.
They also offer loans based on your personal finances to help you build up your business finances. Some might also have special programs for women-owned businesses.
Best of all, CDFIs are local institutions and may have connections to organizations for women business owners in your area. This is a good way to find a potential grant or lesser-known loan opportunities unique to where you live.
Angel investors and venture capital
If you’re willing to sell the equity in your business, angel investors and venture capitalists may be willing to support a woman-owned business with strong potential. This can be a good option for new businesses that haven’t gotten off the ground.
But taking on an investor means considering their input. It could lead to valuable mentorship, but you could also lose some of your autonomy when you do.
Crowdfunding
For women with strong social networks, crowdfunding is often the way to raise money for new ventures or specialty products. This is far from a guaranteed source of income — but if you have strong marketing skills, it could be a good way to secure funding without interest or selling equity.
Grants and resources for women business owners
While there are no business loans for female entrepreneurs, several grant programs and organizations are designed for female entrepreneurs that you can use to support your business. Here are some great places to start:
You’ll likely need to become a member and pay annual dues to join some organizations. But in exchange, you’ll get access to training programs, discounts from merchants and services and help applying for financing like SBA loans. Some can also connect you with incubator funds to get your startup off the ground or certify your company as a Woman-Owned Small Business. These include:
There are also resources for specific industries. Organizations like the National Association of Women in Construction (NAWIC) or the National Association of Women in Real Estate Businesses (NAWRB) exist — so reach out to mentors in your industry to see if there are organizations your business can join.
You can also explore funding options for minority-owned businesses, which includes both grant opportunities and specialized programs.
Become certified as a women-owned business
Certifying your business as majority-owned by women is an important step to securing federal contracts. To get certified as a WOSOB or an Economically Disadvantaged Women-Owned Small Business (EDWOSB), determine if your business is eligible. Your business must have one or more women who claim at least 51% ownership. The SBA has a number of FAQs, forms and support documents to help you complete the process.As of October 2020, self-certification is no longer available. If you previously self-certified, you must recertify through an approved third-party certifier once your federal contracts are finished.
How to qualify for a business loan
While requirements vary widely between lenders, most require your business to meet these three criteria at a minimum:
Good to excellent personal credit score of 670 or higher
At least three years in business
At least $100,000 in annual revenue
If you don’t meet these requirements, you still have options. You might want to look into microlenders, CDFIs and online lenders. Your company doesn’t need to be majority-owned by a woman to apply for a business loan designed with female entrepreneurs in mind.
How to apply
Just like any business loan, you will need to follow a few basic steps to apply:
Determine the type of financing you need
Compare lenders and prequalify
Gather supporting documents
Submit an application and interview, if required
The exact process depends on the type of loan and the lender. While these generalized steps are common for most loans, you’ll need to contact your lender to ensure you have the information it needs to keep the application process quick.
Typical required documents
Different lenders require different documentation, but you’ll typically need basic information to apply across the board. Here’s a breakdown of what you might be asked to submit when applying:
Business information
Business tax returns
Business bank statements
Lease agreements if you operate out of a storefront
Proof of business ownership
Business asset transactions
State filings
Business plan
Personal information
Personal tax returns
Social Security number
Contact information and mailing address
Proof of residency
Personal credit score
History of business financing for women
Women couldn’t apply for a business loan on their own until relatively recently. It wasn’t until 1988, with the passage of the Women’s Business Ownership Act, that female entrepreneurs legally protected access to business resources, financing and contracts.
The federal law eliminated state laws that required women to have a male relative or husband cosign business loans, established the Women’s Business Center to offer entrepreneurial support to women and required the US census to include women-owned corporations when collecting data.
Before COVID, female-owned employer firms were growing faster than male-owned counterparts, with a growth rate of 16.7% between 2012 and 2019, according to an annual report by the National Women’s Business Council (NWBC). However, female business owners were disproportionately represented in the industries that COVID impacted the most and are struggling to recover.
In 2022, the NWBC found that the most popular industries for women-owned businesses included the following:
Retail (storefront and ecommerce): 22.32%
Health, beauty and fitness services: 16.07%
Business services: 12.50%
Food and restaurant: 11.61%
Education and training: 5.36%
Retail and restaurants are also some of the most vulnerable to recessions, according to the Kenzie Academy. And any business that’s dependent on Americans having extra cash to spend will likely be affected — including health, beauty and fitness and potentially business services as companies look to cut costs. This is one reason why women may have a hard time receiving financing. Lenders see vulnerable industries as a higher risk.
How female entrepreneurs can prepare for a recession
Since many women-owned businesses are in industries at risk of losing revenue during a recession, female entrepreneurs may want to take some steps now to make sure they’re prepared.
Avoid consolidating business credit cards into a term loan. A term loan comes with fixed payments that may be inflexible — and with high interest rates, you likely won’t be able to save much with debt consolidation anyway.
Build up cash reserves and avoid costly expansions, like hiring more staff or opening a new storefront. Investing in growth now could backfire.
Adjust payment terms for clients if you’re a business-facing business and require them to get their invoices in more frequently. This can help you avoid expensive working capital financing like invoice factoring.
Visit our guide to the best small business loans to learn more about your financing options to cover working capital and other expenses.
Anna Serio is a lead editor at Finder, specializing in consumer and business financing. A trusted lending expert and former certified commercial loan officer, Anna's written and edited more than 1,000 articles on Finder to help Americans strengthen their financial literacy. Her expertise and analysis on personal, student, business and car loans has been featured in publications like Business Insider, CNBC and Nasdaq, and has appeared on NBC and KADN. Anna holds an MA in Middle Eastern studies from the American University of Beirut and a BA in Creative Writing from Macaulay Honors College at Hunter College, CUNY.
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