Best Small Business Loans for Women

In 2018, women-owned businesses in the United States were among the fastest-growing segment of entrepreneurs in the U.S., representing four out of 10 businesses and contributing $8.1 billion in revenue.

To qualify as a woman-owned business, the company must be 51% owned and operated by one or more women.

Since 2007, the number of women-owned businesses has skyrocketed with an incredible 58% increase whereas all businesses in the same period only grew by 12%.

Despite this, women only secure 2% of venture capital funding and, when it comes to loans, tend to receive less funding and pay higher interest rates than male business owners.

More often than not, women entrepreneurs tend to spend their personal savings on business endeavors and unfortunately are less likely to seek funding from traditional banks.

With so much growth in women-owned businesses in the U.S., some lenders are offering small business loans specifically for women; however, there are also small business loans that aren’t specifically designed for women, but do offer ideal terms that may be just as good.

Let’s review what lending opportunities are available for women business owners.

What Types of Small Business Loans are There?

There are various types of small business loans available to female small business owners.

Here is a list of the most common types of small business loans:

1. Short-term (bank or online)
2. Long-term (bank or online)
3. Line of Credit (bank or online)
4. Small Business Administration (SBA)
5. Non-profit
6. Microloans
7. Merchant Cash Advances
8. Equipment
9. Invoice Financing

In addition, business credit cards and personal loans are other options available to secure funding for the purpose of starting up or expanding a small business.

Each loan type has different qualifying requirements such as credit score and years in operation, and each type has varying maximum loan amounts, terms, interest rates, and speed of delivery.

Additionally, there are certain fees associated with the small business loans that also vary depending on the type of loan.

What are the Best Small Business Loans for Women?

In addition to small business lenders, there are organizations that specifically focus on assisting women business owners to not only secure funding to start or expand their small businesses but also offer support during each phase of business development.

Online Lenders

Since the 2008 financial crisis, a host of online business lenders have emerged, offering loans with less stringent requirements than traditional sources of financing, such as the Small Business Administration (SBA), banks, or cooperatives.

Though borrowing costs are higher with online lenders, their funding is considerably quicker, providing the borrowed capital to purchase inventory, expand, and bridge seasonal cash flow gaps.

Additionally, online loans are optimal for women who have poor or average credit and who need to secure funding quickly.

Small Business Administration

The federal government’s Small Business Administration (SBA) offers term loan programs to qualifying small business owners, including women-owned businesses, for government-backed loans through lenders using its Lender Match tool.

Because these loans are backed by the government, lenders can offer lower interest rates, more flexible terms, and longer-term financing than traditional lenders.

You will need excellent credit though to qualify for an SBA term loan.

SBA also offers the following small business loan programs:

1. 7(a) loans – basic SBA loan offered to small businesses with deficiencies in their loan applications; SBA secures up to 75% of the loan
2. CDC/504 loan – long term, fixed-rate financing for small businesses for the purpose of acquiring fixed assets to modernize or expand their business
3. Microloans -  this program lends small amounts of money to startups and microbusinesses such as at-home, online, or freelance businesses

In addition, SBA has a funding opportunity for small disadvantaged businesses through its 8(a) Business Development program.

The primary requirement is the business must be 51% owned by socially or economically disadvantaged persons.

The SBA’s Office of Women’s Business Ownership (OWBO) also helps women entrepreneurs with training, counseling, and providing access to capital.

And, there is the National Women’s Business Council (NWBC), a non-partisan federal advisory council to the SBA, Congress, and the President, which focuses on providing research and resources to women business owners.

Crowdfunding

Crowdfunding, or crowdsourcing, has gained in popularity since its origins in the late 1990s.

It has become a significant player in providing small amounts of capital to startups and women-owned small businesses.

Funds are raised via online platforms by multiple contributors.

Many believe crowdfunding has the potential to break down barriers that many women face when attempting to secure funding from traditional banking institutions.

The NWBC has a list of best crowdfunding sites to raise capital for women entrepreneurs.

Business Line of Credit

A line of credit can be a great option for women business owners who need flexibility in their funding source.

For example, the borrower draws only the funds needed to meet certain business financial obligations.

Interest will only accrue on the drawn funds.

Once the borrower pays back the drawn amount and accrued interest, no further payments are required on the loan.  

Interest rates and loan amounts differ per lender, with some lenders waiving the requirement of “number of years in business’ when approving a line of credit.

Female small business owners can apply for a business line of credit either with a traditional bank or with an online lending service.

Online lenders use complex algorithms to determine the risk of lending funds, a different model than what banks apply in traditional underwriting methods.

Microloans

These are typically small loan amounts with shorter loan terms. SBA is the largest lender of microloans in the United States, but there are other non-profits that do so including Kiva, LiftFund, TrustLead, and others.

Grants

Securing a grant can be a tougher route due to stricter application guidelines.

Grants for women entrepreneurs are available through federal, state, and local government agencies as well as many private institutions.

Grants are desirable because the grantee is not obligated to repay the funds.

Check out the SBA Women Business Center for government grant opportunities in your state.

A Note on Traditional Lenders

Unfortunately, women business owners have been underserved by conventional lending institutions.

Only about one-third of female small business owners are successful in obtaining funding from traditional lenders.

Considering all this, and the emergence of women-run small businesses in the U.S., we've determined the following to be the best choices for small business loans for women.

Company Reviews

OnDeck

OnDeck provides small business loans that are ideal for women business owners to use as expansion capital.

The company features a maximum of up to $500,000 with its term loans and up to $100,000 with its lines of credit.

It does offer a multitude of loan types including commercial loans for small business, business lines of credit, and microloans.

The online lender can approve loan applications quicker and with fewer requirements than traditional lenders.

Their expert advisors go through comprehensive training, so the advisors can help assess each borrower's business across a selection of 700 different industries.

OnDeck's flexible terms and rates are based on the company's performance, not solely on personal credit history, evidence of their commitment to encourage and develop small businesses.

Their loan application can be completed online or over the phone in as little as 10 minutes, and prospective borrowers can expect a decision within minutes, with funds available in as little as 24 hours.

Though they do accept applications from business owners with personal credit scores as low as 500 for term loans, the majority of borrowers have scores of 660 or higher, gross revenues exceeding $450,000, and a median time in business of seven years.

LendingTree

LendingTree puts female entrepreneurs in contact with its network of funding partners, giving them access to many different types of small business loans including short term loans, term loans, business lines of credit, working capital loans, equipment loans, accounts receivable financing, and SBA loans.

LendingTree is one of the largest websites of this type in the business and has helped over 40 million people find funding.

After completing the application (just ten questions), LendingTree puts women business owners in contact with a maximum of four lenders, thereby increasing their chances of obtaining the best rates and loan terms.

LendingTree also provides detailed information for female business owners on how to prepare for the loan application process including answering the following questions: why you need the loan, how much do you need to borrow, and how will you pay back the funds.

The company also provides the list of documentation that may be required depending on the loan.

Kabbage

Kabbage provides small business loans by focusing more on accounting, banking, and e-commerce data than on credit scores during its qualification process, which makes it ideal for women business owners with problematic credit histories.

Since Kabbage offers loans for customers with poor credit, these can be expensive, have a complicated fee structure, and annual percentage rates that range from 24% to 99%.

However, Kabbage can be convenient for borrowers in need of quick access to working capital.

Their application process requires no paperwork and business owners can be approved and funded within a few days, at the most.

Though the vast majority of borrowers have credit scores of at least 500, Kabbage primarily considers data from the business' linked accounts, its average monthly revenue, and the number of years it's been in business, making this company ideal for female entrepreneurs with less than stellar credit who need funding quickly.

Torro

Torro puts borrowers in contact with dozens of small business lenders, brokers, and private investors offering low rate loans with affordable payments for nearly any type of business: existing, startups, and hard-to-place loans.

Their application process is simple and quick, without any asset verification, no business appraisal, and little to no paperwork.

They are an ideal company for female-run startups, as they divide the types of financing between loans for documented ventures and funding options for idea-based ventures.

Torro can also help borrowers obtain merchant cash advance loans for the quickest access to funds.

These are repaid based on the borrower's projected future income, with a small percentage taken from each credit card transaction until the loan is repaid in full.

For more options, check out our 10 Best Small Business Loans of 2019.