Women-owned businesses are thriving in the U.S., employing nearly 9 million people, and generating $1.7 trillion in sales as of 2017. Although they’re generating incredible amounts of revenue, most women-owned businesses are considered small businesses since they have fewer than 500 employees.
While nearly all small business owners are familiar with the challenge of getting access to capital, for women-owned small businesses, that challenge is compounded. On average, women entrepreneurs get 50% less funding than their male counterparts and in 2017, female founders received just 2% of venture capital dollars.
These statistics show that women-owned businesses are key to our nation’s overall economic success, and their importance is only growing stronger. But without broadened access to startup and growth capital, those businesses can’t reach their full potential. Several initiatives such as grants and federally sponsored funding have been established to help bridge the funding gap, as well as more widespread access to business financing through online lenders.
Here are three ways women-owned small businesses can get the funds they need to dream a little bigger.
1. Apply for a small business loan
Women-owned businesses can get funding through loans from traditional banking institutions, peer-to-peer lenders, or online lenders, and each has its pros and cons.
Applying for a loan from a traditional bank is time consuming and will likely require collateral. While it’s one of the more inexpensive forms of financing out there, there’s no guarantee that the application process will pay off. Studies show that women business owners make multiple attempts to secure bank loans or lines of credit, and 40 percent of women business owners applying for a loan never succeed in obtaining funding. Additionally, loans to women make up only about 4 percent of all commercial loan dollars.
Peer-to-peer (P2P) lending platforms act as a bridge between small business owners in need of funding and banks and investors who are willing to lend it. While they’re fast and easy to obtain if a business is in good standing (with a credit score over 600), they can come with a hefty interest rate, and require due diligence in calculating the true cost of the capital.
Online lenders use the latest technology to expand working capital solutions for small businesses. Because these lenders take into consideration factors like online sales, cash flow, bank transactions, and other data, traditional qualifiers like credit score and collateral are not as vital in securing a loan, making this type of financing much more accessible. Outside of the traditional business loan, female business owners may consider applying for a business line of credit that can serve as a flexible option for growing a business, including hiring more employees, purchasing new equipment, and taking marketing efforts to the next level.
2. Apply for a private small business grant
As opposed to business credit cards, lines of credit, or loans, grants for small businesses are essentially free financing, which is why the competition for them is fierce. The funds can usually be allocated to very specific purposes, making grants a great supplemental form of funding for qualified female entrepreneurs.
The Cartier Women’s Initiative Award is great for female entrepreneurs just getting their business off the ground. Once a year, 18 female entrepreneurs will receive either a first prize of $100,000 and one-on-one business mentoring, or a second prize of $30,0000. Additionally, each of the finalists will also receive a spot in the INSEAD Social Entrepreneurship 6-Day Executive Program (ISEP).
The Amber Grant Foundation awards $10,000 to a different women-owned business every month. The winners for the monthly grants also qualify for the annual $25,000 Amber Grant, which will be awarded at the end of the year to one of 12 qualifiers.
For those in business for three years or more, the Eileen Fisher Women-Owned Business Grant Program is another great funding option for women-owned small businesses. There are a few eligibility caveats: women must make up at least 51% of the business ownership, the business must have less than $1 million in annual revenue, and the business must be focused on environmental or social change.
The Open Meadows Foundation awards $2,000 grants toward women-backed projects that promote gender, racial, and economic justice. Open Meadows only considers organizations that have no more than $75,000 in budget resources and it reviews proposals in cycles throughout the year.
The FedEx Small Business Grant is open to all small business applicants, but the majority of the winners have been women-owned businesses. In fact, the very first grant winner was a woman.
3. Seek out federally-sponsored funding
The Small Business Administration (SBA) provides funding for entrepreneurs around the country in the form of grants and small business loans. The Women’s Business Center is a great resource for female entrepreneurs, which includes a database of organizations that award grants to women on a local level.
Through the InnovateHER Challenge, the SBA awards three female small business owners a total of $70,000 in prize money.
Grants.gov is a database of federally sponsored grants, including grants for small businesses. To view grants specifically for small businesses, filter the results of the page under “eligibility.”
The SBA also offers small business loans through partnerships with financial firms. These loans tend to have lower interest rates because the SBA puts a ceiling on how much money approved lenders can make off each loan. Be aware that SBA loans can take a long time to secure, so if you’re looking for quick financing, look for other options.
Women-owned businesses are a critical part of the U.S. financial ecosystem, and while the lending landscape is improving for them through more business loan options, private grants, and federally-sponsored funding, they’re still being underserved. To close the funding gap between female entrepreneurs and their male counterparts, organizations must continue to rally around women in small business, forming programs, initiatives, and legislation in support of female small business owners.