Best Small Business Loans for Women in 2020
Finding the Best Business Loans for Women in 2020
Women-owned businesses are on the rise in the United States, accounting for 9.2 million employees across the nation (take that, glass ceiling). With so many small businesses just getting started, it’s helpful for innovative women to know where they can turn to for the best business loans. Our team put together a list of the best small business loans for women in 2020 using our proprietary SimpleScore methodology, which compares interest rates, loan amounts, product variety, resources and fees of the best small business loans for women. Let’s take a look at some of the most lady-friendly lenders you can use to get your small business up and running.
The 6 best small business loans for women of 2020
- Funding Circle – Best Overall
- Kiva – Best for Microloans
- National Funding – Best for Bad Credit
- Lending Club – Best Peer-to-Peer Lender
- Lendio– Best for Startups
- Street Shares – Best for Veterans
|Lender||APR||Loan Amount||Business Requirement||SimpleScore|
|Funding Circle||Starts at 6%||$20,000–$5 million||680 credit score; in business three years; $500K annual revenue||3.6/5|
|Kiva||0%||Up to $15,000||Must raise funds from network of family and friends||4/5|
|National Funding||5%–8%||$5,000–$500,000||In business at least one year; 600 minimum credit score; $100K annual revenue.||4/5|
|LendingClub||9.77%–35.98%||$5,000–$500,000||12 months in operation;$50K annual sales; fair personal credit score; own 20% of company||2.6/5|
|Lendio||0%–17%||$500–$750,000||Credit score of 680 or higher;6 months (or more) in business||4.75/5|
|Street Shares||8%–39.99%||Up to $200,000||In business for one year||3.8/5|
What is a small business loan?
A small business loan is a loan guaranteed by the U.S. Small Business Administration (SBA). This guarantee means that even if borrowers can’t repay their debts to their lender, the SBA has the funds necessary to pay out the guaranteed amount. Small business loans are different from personal loans in this regard, and require supporting business documentation in order to qualify.
How do small business loans work?
Small business loans come in all shapes and sizes in order to meet the unique needs of each borrower. Business owners can choose from a small business line of credit, accounts receivable financing, working capital loans, small business term loans, SBA small business loans, equipment loans, and small business credit cards when selecting a financing option. The loans work in the same way as any other loan: Borrowers receive funds, accrue interest on those funds, and repay what they have borrowed over a set term. One of the main differences in being able to qualify for a small business loan versus a personal loan is the need for a business plan and supporting business documentation.
Finding the best business loan as a woman business owner
The best business loans for women are those that offer low interest rates and are offered through lenders that focus primarily on supporting female entrepreneurs. When seeking out the best small business loans for women, it’s a good idea to look for investors that fit your demographic. Most investors are white men, which can have a major impact on how funding gets allocated to women-owned businesses. Be sure to do your homework on how many female entrepreneurs your chosen lender has supported before submitting your application.
Payment and terms
Payment and term agreements vary from lender to lender. Typically, a lender looks at your credit score, profitability, and business plan to determine the best financing solution for your small business. One of the biggest things to watch out for are lenders with factor rates. These are different from interest rates as they are calculated in advance based on the original funding amount and can lead to small business owners paying more for their money than they would if they borrowed from elsewhere.
How to get approved for a small business loan
There are a few simple steps that can improve your chances of being approved for a small business loan, including the following:
- Review business finances: Reviewing your finances can give you a better sense of what loans you may qualify for and can help you better target your applications to the right lenders.
- Strengthen credit score: Higher credit scores can unlock lower rates and a wider variety of lenders. Additionally, a better credit score can help you qualify for a larger loan amount and ultimately impacts your ability to secure loan approval.
- Gather the required documents: Many lenders require you to submit information about your business during the application process, so be sure to gather any documents you think you might need. This includes information about your yearly profit margins, business history, and business plan.
- Develop a business plan: Speaking of business plans, many lenders are likely to look favorably on prospective borrowers if they have a strong business plan. Whether you’re just starting out or have been in business for several years, it’s a good idea to come up with a plan for how these funds will help your business succeed.
Alternatives to business loans for women
In addition to small business loans, there are a variety of other funding avenues women entrepreneurs may wish to pursue. These include:
- Grants: Grants are essentially free money, so they should always be at the top of the list when it comes to funding sources for small businesses. There are many grants geared specifically toward women, including Grants.gov, the Girlboss Foundation and the Eileen Fisher Women-Owned Business Grant.
- Angel investors: Angel investors are wealthy individuals who believe in a particular business or startup enough to invest substantial capital in its growth. These investors are typically found through networking and pitch events.
- Venture capital: Venture capital is another funding option to consider for women-owned small businesses. Venture capital is usually offered in exchange for partial ownership and control over a company, so be sure your venture capitalist is aligned with your business objectives prior to requesting funding from them.
- Crowdfunding: Crowdfunding is a great option for woman-owned small business funding, especially if you have a particular product or project that you think can garner widespread support. Popular crowdfunding platforms include Kickstarter, Indiegogo and GoFundMe.
- Small Business Association Loans: The Small Business Association offers loans to qualified borrowers, including women who are small business owners.
[Related: The Small Business Guide to SBA Loans]
How to choose the best small business loan for you
There’s plenty to consider when choosing the best small business loans for women. Understanding what to look for when selecting a lender is the first step to finding the right solution. The following illustrates some of the things that make certain business loans better for women than others:
- Community commitment: Many of the lenders outlined in this article have indicated a specific interest in supporting women-owned businesses and businesses owned by marginalized groups. Before selecting a lender, find out what programs they have available that are specific to women.
- Low rates: The biggest factor to consider when choosing a small business loan is the interest rate. Many lenders offer competitive, low interest rates to qualified borrowers who can demonstrate a good credit history. One of the best ways to ensure a low interest rate is by referencing the lender’s minimum required credit score and comparing it to your own before applying.
- Longer terms: It’s a good idea to opt for small business loans that have reasonable repayment terms. Applying for a $100,000 loan that needs to be paid back in six months might not be the best start for your small business. Make sure the available repayment terms meet your needs by researching what timeframes are offered through your chosen lender.
- Additional fees: Some lenders impose a factor rate in addition to an interest rate. This can lead small business owners to paying much more for their loans than they originally anticipate. Other lenders also apply a prepayment fee and broker/agent fees, so be on the lookout for unexpected costs associated with your loan!
We welcome your feedback on this article and would love to hear about your experience with the business loans we recommend. Contact us at firstname.lastname@example.org with comments or questions.