Sponsored by Mulligan Funding:
October may be Women’s Small Business Month, but if you are a female entrepreneur, then you know that every month is a time for celebration. According to the 2016 State of Women-Owned Businesses, there are currently more than 11 million women-owned businesses in the U.S. Combined, these businesses employ more than 9 million people and generate more than $1 trillion in revenue. While this represents more than a 30% increase since 2009, challenges remain. With that in mind, here are some must-know tips to get the money you need today.
In their 2012 book, Susan Coleman and Alicia Robb noted the biggest challenge facing women-owned businesses is access to finance. Based on their research, female entrepreneurs get nearly 80% less financing than other businesses, especially in their first year of operations. This ‘funding gap’ can put a tremendous strain on a business. Not only does it make it harder to succeed, but it also means that most female entrepreneurs must use their own savings or their own credit to finance their businesses.
Fortunately, several small business loan options for women have cropped up in recent years. But the most important thing to know is which type of loan makes the most sense based on your situation. This step includes looking at business credit cards, bank loans, grants, and other options that will help you get the money you need.
The source and type of funding you are looking for will largely depend on the need. As such, remember this axiom — short-term loans for short-term needs and long-term loans for long-term needs. Simply put, don’t get a six-month loan for something that will take six years to repay. Keep this in mind when you are considering credit options for your business.
Let’s start with commercial banks. While they are no longer the first lender of choice for most small businesses, the reality is that some banks have announced special programs just for women-owned businesses. A big driver of this push was a section to the 2010 Jobs Act which set aside $30 billion for this purpose.
Don’t jump for joy just yet. While these programs are beneficial, the application process tends to be slow as the banks generally require a lot of paperwork. In some ways, the banks are being thorough. But you need money today, so why are you going through a four-to-six-week process just to get approved?
An often-overlooked tip in getting the money you need for your business today is networking. Both the Small Business Administration (SBA) and the National Association of Women Business Owners (NAWBO) offer programs and events where female business owners can get together to discuss the challenges they are facing. One such event is the National Women’s Business Conference which is organized by NAWBO, and the 2017 installment will be held in Minneapolis. Besides knowing that you are not alone, these forums become an opportunity to share best practices with business owners around the country.
In recent years, several organizations that specialize in making loans and giving grants to women-owned businesses have popped up. Some of these groups offer loans as small as $500 with many requirements that are suited to meet the needs of your business today.
In addition, you should check which tax credits may be available for you. The National Women’s Business Council (NWBC) has a list of selected programs, but you should also check with your state and local government to find out what they can do for you.
Whatever you do, make sure to avoid lenders who are trying to make a quick buck by targeting female entrepreneurs. These unscrupulous lenders know you are underserved, so they often make outrageous promises. Ultimately, the proof is in the pudding. No matter who you decide to work with, make sure you check their reputation by talking to former customers before signing on the dotted line.
While you may need the money today, don’t make a decision you will regret in the future. Check the terms, talk to other business owners in the same situation as you, and remember to reach out to former customers to find out their thoughts.