9 Alternative Financing Sources to SBA Loans for Women

Post-COVID data reveals a stark contrast in women’s ability to secure a loan compared to their male counterparts. In 2022, 46% of small businesses in the USA applied for business financing, but success rates (unsurprisingly) varied by gender. Over half of the male-owned small businesses received all the funds they requested, and only one-third of female-owned firms received a portion of what they asked for. The disparity deepens when considering the intersectionality of race and gender, as women-owned businesses face even greater challenges in accessing financing.

Small Business Administration (SBA) loans are the preferred funding method for female entrepreneurs, with a 61% approval rate compared to 50% for men-owned firms. SBA loans offer favorable terms, a government-backed guarantee, and often lower interest rates, making them a highly competitive route for businesses seeking affordable financing options. Given the intense competition and strict eligibility criteria, it’s a good idea for female entrepreneurs to actively seek out alternative funding solution.

The Small Business Administration (SBA) is a government agency dedicated to supporting small businesses by providing resources, guidance, and financial assistance. The SBA offers a range of empowering opportunities for women-owned businesses including loans, grants, and special programs designed to fuel business development and open doors to government contracts.

SBA Loans:

• SBA 7(a) Loan: This loan is for small businesses looking to secure funding for various business needs, including refinancing old debt, supporting employee payroll, or working capital.
• SBA 504 Loan: This financing program is tailored specifically to assist small businesses in acquiring fixed assets like real estate and equipment.
• SBA Express Loan: The SBA Express Loan is a streamlined financing option providing a faster application process than other SBA programs with a maximum loan amount of $350,000.

Government Grants & Programs:

• WOSB Federal Contracting Program: The WOSB (Women-Owned Small Business) Federal Contracting Program is a government initiative that sets aside a certain number of contracts for women-owned businesses, allowing for a better chance of securing a government contract.

• SBA 8(a) Program: The SBA 8(a) Business Development Program is a government initiative that helps small businesses by providing access to government contracts, mentorship, and training to foster growth and development.

• SBIR Program: SBIR (Small Business Innovation Research) is a government program that focuses on the collaboration of federal agencies and small businesses to turn their creative ideas into new products or services.

• STTR Program: The STTR (Small Business Technology Transfer) program is another government initiative that helps small businesses partner with research intuitions to transform ideas from labs to real-world products or services.

• STEP: STEP (State Trade Expansion Program) is a government initiative that is helpful for businesses looking to sell their products in other countries by providing support and money for things like marketing and participating in trade events.

1. Grants for Women-Owned Businesses

Grants for women-owned businesses are financial awards provided by the government, private companies, or nonprofits. These grants are designed to support and empower female entrepreneurs by offering funds for starting, expanding or enhancing their business. The best part about grants —you don’t have to pay them back! The Amber Grant, Cartier Women’s Initiative Award, and The FoundHer Program are designed specifically for women-owned businesses to address the gender gap in entrepreneurship funding.

2. Community Development Financial Institutions (CDFIs)

Community Development Financial Institutions (CDFIs) play a crucial role in supporting neglected communities by providing financial services such as loans and investments to those who face challenges accessing funding.

For women starting businesses, applying for a CDFI loan is a good idea because these institutions prioritize inclusivity and aim to address the economic imbalance. CDFIs may offer lower interest rates, flexible requirements, and technical assistance, making them a valuable resource for underserved populations.

To find a CDFI near you, check out the Treasury Department’s award database or use the Opportunity Finance Network’s CDFI locator. Applying for a CDFI requires standard information like personal and business tax returns, lease agreements, bank statements, and income and balance sheets.

3. Microloans

Microloans are exactly what they sound like – a small lumpsum of money, ranging from a few hundreds to several thousand dollars, offering accessible funding for female entrepreneurs looking to start or expand their business.

Pros of Microloans:

• • Accessibility: Usually geared towards businesses generating less revenue.
  • Flexibility: Repayment terms can be tailored to your circumstances.
  • Community Support: Some microloan programs offer community crowdfunding.

Cons of Microloans:

• • Limited Amount: The average microloan is about $13,000.
  • Eligibility Criteria: Some microloan programs have strict eligibility requirements.

  In the United States, microloan programs like Kiva and Accion Opportunity Fund provide accessible funding opportunities for small business owners with zero to low-interest rates. Here’s a quick look at each:

Kiva Microloans:

• Who can apply: Anyone with a promising business idea, especially those making a positive impact.
• Loan amount: Varies
• Repayment terms: Flexible with short to medium term options.
• Interest rates: Often 0% interest, relying on crowdfunding.

Accion Opportunity Fund:

• Who can apply: Small business owners that struggle to get traditional loans.
• Loan amount: Up to $100,000.
• Repayment terms: Flexible with short-term and medium-term options.
• Interest rates: Competitive rates depending on creditworthiness.

4. Online Lenders

Another option for female entrepreneurs is to explore the wide array of online lenders. At National Funding, we’re dedicated to combating the imbalance in securing financing for women and minority-owned businesses. We offer various types of loans, including working capital, equipment financing, and short-term loans.

The differences:

Working Capital Loans: These loans cover everyday expenses like payroll and bills to keep your business running.

Equipment Financing: This type of loan is specifically for business equipment like machinery or computers.

Short-Term Loans: These are designed to help with urgent expenses or opportunities and are expected to be paid back in a short period, usually within a year or less.

Online lenders can be a great choice for women-owned businesses struggling to secure funding. Here’s why:

1. Quick funding
2. Lenient qualifications
3. Flexible repayment terms

5. Women-Focused Business Organizations

Three standout organizations supporting women entrepreneurs are WBC (Women’s Business Centers), NAWBO (National Association of Women Business Owners), and the US Women Chamber of Commerce.

WBC (Women’s Business Centers): These centers act as valuable guides offering resources and training to assist female entrepreneurs in starting and growing their business.

NAWBO (National Association of Women Business Owners): NAWBO is a community of women business leaders providing support, network opportunities, and essential resources for women owned businesses.

US Women Chamber of Commerce: This chamber advocates for women owned businesses on a broader scale, ensuring their voices are heard and needs are addressed.

6. Venture Capital and Angel Investors

For female entrepreneurs seeking financial support, exploring avenues like venture capital and angel investing can open many doors. Venture capital involves investment from firms that provide financial support in exchange for equity. Notable venture capital companies supporting women-owned small businesses include:

• Aspect ventures: They focus on investing in early stage, disruptive businesses with an emphasis on diversity, including women-led enterprises.
• Female Founders Fund: This venture capital firm is dedicated to investing in female founded startups, offering financial backing and strategic support.

Angel investors are individuals who invest their own money in promising ventures. Angel investors look for business with a solid plan, growth potential, a talented team, and a market opportunity.

Pros and Cons of Investor Funding:

Pros:

• Financial boost
• Expertise
• Network

Cons

• Loss of control
• Expectations for returns

7. Accelerators and Incubators

Accelerators and incubators are support systems created to provide businesses with mentorship, resources and funding opportunities.

Accelerators: They offer rapid help by providing advice, resources, and sometimes money but they take a small piece of the business.

Incubators: Also offers ongoing support, resources and sometimes money too, but usually without taking part in the business.

8. Partnerships and Joint Ventures

Joining forces with other businesses can open doors to expertise, and exciting opportunities that let you share tools and resources without breaking the bank. Partnerships allow you to tap into markets you might have missed on your own, giving your business opportunities to grow. Joint ventures allow you to take on bigger projects and expand your business while minimizing risk.

9. Crowdfunding

Crowdfunding is a great option for small businesses, offering access to diverse funding sources, community engagement, and a platform to showcase innovative ideas to a bigger audience. Here’s a quick glance of the two main types of crowdfunding and the platforms associated with them:

Rewards-Based Crowdfunding: In exchange for funds, rewards or perks are offered by the business. Kickstarter and Indiegogo are popular rewards-based crowdfunding platforms.

Equity-Based Crowdfunding: Businesses offer equity or ownership stakes in exchange for financial contributions. Investors become shareholders. Equitynet and Fundable are notable equity-based crowdfunding platforms.

Each platform serves a unique purpose, whether its Kickstarter and Indiegogo supporting creative projects or platforms like Crowdfunder and Equitynet facilitating equity-based crowding for a wide range of businesses. The choice between rewards-based and equity-based financing depends on the goals of the business.

Exploring alternative financing sources to the SBA opens a world of opportunities for female entrepreneurs. While the SBA does provide valuable support, the diverse landscape of alternative funding from crowdfunding to online lenders, empowers women-owned businesses with flexibility and options tailored to their unique needs. Embracing alternatives not only enhances financial resilience but also fosters innovation and adaptability, propelling small businesses toward growth and success in our dynamic economic landscape.