Business Loans for Women-Owned Companies Still Lag Behind Male Counterparts, But Gap Is Rapidly Closing
Over the last decade, women-owned companies have grown at a rate five times faster than the national average, according to a recent annual report commissioned by American Express OPEN. There are now an estimated 11.3 million women-owned businesses in America, and they generate more than $1.6 trillion in revenue. Women are the majority owners of 38% of the country’s enterprises, however, when it comes to small business loans, women still struggle with the process of getting approved for funding.
Despite this success, women lag behind in small business loan approval rates. This is due to having lower average annual revenues and lower credit scores than their male counterparts. However, among women-owned businesses solely, their revenues had indeed increased.
There are some measures to address the lending gap. Women entrepreneurs can indeed boost their prospects of receiving funding for their businesses.
1. Keep Business Records Up-to-Date
First impressions are everything, especially when entrepreneurs are requesting a small business loan. Banks and other lending institutions want to be sure that the funding you are requesting will be paid back in a timely manner. A good way to assure lenders is to have financial statements and balance sheets in order. Banks will want to see your tax returns and recent financial history to determine that your company is not in dire straits before granting your loan request.
If you are behind in payments or your financials are disorganized, hire a bookkeeper to straighten things out. Getting organized will go a long way.
2. Build Your Credit
Paying bills on time and in full is the most powerful way to improve a credit score. Sometimes that is not possible, but there are ways to make incremental corrective measures.
- Consistently pay down balances that are outstanding
- Pay down any lines of credit below 50% of the limit
- Consolidate and use a lower interest vehicle, such as a business line of credit, to pay down more expensive debt, such as credit card balances.
3. Apply for Financing Early
Applying for a business line of credit is a good idea for businesses, particularly newer ones that haven’t gone through many up-and-down cycles. A business line of credit usually has a relatively low interest rate, and you don’t have to use it unless you really need to do so. If a cash crunch does happen, you can use the line to cover costs and/or pay more expensive loans first.
4. Apply for Grants
Some non-profits and the federal government have developed a grant programs specifically for women entrepreneurs. For example, the SBA’s InnovateHER Challenge, which launched in 2015, has emerged as a popular initiative for women entrepreneurs with the winner earning as much as $70,000. Meanwhile, non-profits such as the Open Meadows Foundation provide grant opportunities to organizations with under $75,000 in budget resources.