Things have come a long way for aspiring women entrepreneurs in terms of business funding and financial freedom. Even so, there is still a significant gender gap that causes challenges for women hoping to launch their business ventures and fuel growth. 

In fact, until 1988, women entrepreneurs were required to have a male co-signer to take out a business loan. Fast forward to today, 49 percent of all businesses in the U.S. are owned by women – yet women business owners account for just 27 percent of business loan applications as of 2020. 

Women-owned businesses are also known to receive smaller funding amounts than male-owned businesses and typically bring in less revenue overall. Why? The following are just a few of the factors that might make it more difficult for women to get business loans:

  • Building credit. According to recent reports, up until 2020, men always had the higher credit scores on average – not today. Men and women now have nearly identical average credit scores. Even so, men continue to dominate when it comes to creditworthiness and women continue to hit this major roadblock.
  • Industry hurdles. The 2020 Annual Report from the National Women’s Business Council shared that nearly half of all women-owned businesses are in low-growth industries. These industries typically include service-focused businesses that take time to grow.
  • Investor bias. Studies show that women, particularly minority women, have trouble accessing capital for their ideas. They are also generally undervalued by the industry at large. This has led to growing concerns that financial institutions need to improve their overall gender equity and make improvements.

Small Business Loan Options for Women

Fortunately, there are more alternative lending options than ever before. Some of the most common small business loans for women today include:

  • SBA microloans. These loans offer up to $50,000 and are more flexible than regular SBA loans. This financing solution aims to help small businesses grow. Keep in mind, that they cannot be used to purchase real estate or pay off existing debt.
  • Merchant cash advances. An increasingly popular option over the past few years, a merchant cash advance provides a business with cash upfront. The funding is then repaid through a percentage of your business’ credit or debit card sales. MCAs are very easy to obtain, but be sure to compare your options and the fees involved.
  • Microloans for women. Microloans are much easier to secure than a traditional business loan. They have been used a lot over the years by businesses that struggle to qualify for funding elsewhere. Microloans are often a good option for women entrepreneurs because they tend to lend more to women and minority-owned businesses.

The bottom line: wh is that while women’s entrepreneur challenges, there are options out that can help you secure the funding you need to grow. The key is to know which options are right for you, the ins and outs of fees and contracts, and only partner with a lender that understands your unique situation and industry.

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