What women business owners need to know to get the right loan (2024)

FAQs

What women business owners need to know to get the right loan? ›

Although women own 38% of all businesses in the U.S., according to the Women's Business Enterprise National Council, they often face obstacles when obtaining financing. In 2022, 25% of women-owned businesses were rejected for a loan, compared to 19% of male-owned businesses.

Although women own 38% of all businesses in the U.S., according to the Women's Business Enterprise National Council, they often face obstacles when obtaining financing. In 2022, 25% of women-owned businesses were rejected for a loan, compared to 19% of male-owned businesses.

For example, qualifying for a bank or credit union loan might be difficult for women who don't have a strong credit report or an established business-operating history. Filling out the paperwork can be time-consuming, and the approval process is notoriously long.

SBA loans are available to both men and women entrepreneurs. But women tend to seek funding at lower rates than their male counterparts due to the fear of getting rejected for the funds.

Some large, national banks like Bank of America, U.S. Bank and Wells Fargo offer certain loan options for companies with less than two years in business. In general, however, online and nonprofit lenders are more likely to offer startup business loans.

Without cash on hand, you may not be able to get just any business loan. Most lenders want to see a flow of revenue and profit to consider you for a loan.

How much of a business loan you can get depends on your business's annual gross sales, creditworthiness, current debts, the type of financing, and the chosen lender. In general, lenders will only provide loans up to 10% to 30% of your annual revenue to ensure you have the means for repayment.

SBA-qualified lenders usually set their own criteria when assessing your eligibility. Most lenders will require a minimum FICO score of 620 or higher for their SBA Loans.

Some lenders make it difficult to qualify for a $100,000 business loan. Traditional lenders like banks and credit unions prefer applicants with good-to-excellent credit, at least two years in business and an annual revenue of $250,000. Online lenders have less strict requirements than traditional lenders.

What disqualifies you from getting an SBA loan? ›

The most common reasons SBA loans are denied are poor credit, too much existing debt, or insufficient collateral. Other reasons include: Prior bankruptcy. Negative taxable income.

SBA Express loans, part of the SBA's 7(a) loan program, offer the easiest application process and the fastest approval times among all SBA loans. These loans, with payoff periods as long as 25 years, are designed for purposes such as refinancing debt, buying equipment, or improving real estate.

Many businesses can't qualify for an SBA loan, but that doesn't mean there aren't other options available. Once you review why your application was rejected, you can choose to apply again or explore alternatives.

A strong credit history, with a good payment track record and low credit utilization, increases your chances of approval. Another crucial factor in getting a small business loan is your business's financial health. Lenders want to see evidence of stable revenue and positive cash flow.

Both personal loans and small business loans are effective ways to cover expenses to get your small business off the ground. Your choice may come down to how much money you actually need, where you can get the lowest interest rate and whether or not you want to put your personal credit on the line.

Yes, it can be harder to get a mortgage if you're self-employed. You'll need to provide more documentation than someone who has had the same W-2 employment for several years. Some lenders do not work with self-employed individuals because of the increased underwriting requirements.

First, women who want to pursue entrepreneurship are less likely to get the funding required to start a company, which naturally inhibits them from chasing their dreams. Another reason women tend to start fewer companies than men is that they often lack the "overconfidence" of most male startup founders.

While getting a business loan can be difficult since most require strong personal and business credit scores, reliable cash flow and at least two years in business, there are alternatives available to obtain the cash you need.