9 Alternative Financing Sources to SBA Loans for Women

Women-owned firms are creating about half of new businesses for the third year in a row, according to the National Women’s Business Council’s annual report. Yet, women business owners still face challenges in securing the capital they need to run their businesses. On average, women-owned businesses receive half the amount of funding compared to businesses owned by men. The disparity deepens when considering the intersectionality of race and gender, as businesses owned by women of color face even greater challenges in accessing financing.

Small Business Administration (SBA) loans are the preferred funding options among female entrepreneurs, yet less than 15% of SBA loans are approved for women. This loan program is a popular choice for business owners nationwide due to its favorable terms, government-backed guarantee, and often lower interest rates, making the market for SBA loans highly competitive. Given the intense competition and strict eligibility criteria, it’s a good idea for female entrepreneurs to actively seek out alternative funding solutions.

Wherever you are in your business journey, you deserve an accessible funding solution that can support your goals. First, we’ll outline what financing options are available from the SBA. Then, we’ll provide 9 alternative solutions that support women-owned businesses.

The 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 increasing working capital.
• SBA 504 Loan: This financing program is specifically tailored to help small businesses acquire 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:

In addition to its loan programs, the SBA offers grants and financial awards for business owners.

• WOSB Federal Contracting Program: The Women-Owned Small Business (WOSB) Federal Contracting Program is a government initiative that sets aside 5% of its 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 that are socially and economically disadvantaged by providing access to government contracts, mentorship, and training to foster growth and development.
• SBIR Program: Small Business Innovation Research (SBIR) 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 Small Business Technology Transfer (STTR) program is another government initiative that helps small businesses partner with research institutions to transform ideas from labs into real-world products or services.
• STEP: State Trade Expansion Program (STEP) 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 businesses. The best part about grants —you don’t have to pay them back! The Amber Grant, Cartier Women’s Initiative Award, and FoundHer Program are designed specifically for women-owned businesses and aim to address the gender gap in entrepreneurship funding.

2. Community Development Financial Institutions

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

CDFIs may offer lower interest rates, flexible requirements, and technical assistance, making them a valuable resource for women-owned businesses.

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 pretty straightforward. They’re often smaller lump sums that female entrepreneurs can use to start or expand their businesses.

Microloans are designed to be flexible and accessible. So, if your business won’t qualify for a standard loan due to revenue or unique circumstances, a microloan can be a great fit for your needs. The average loan amount for a microloan is $13,000.

In the United States, microloan programs like Kiva and Accion Opportunity Fund provide accessible funding opportunities for small business owners with low or no 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 who 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

Online lenders offer fast, accessible financing solutions to small- and medium-sized businesses. Online lenders, like our partners at SmallBusinessLoans, cut away all the red tape associated with traditional loans and make it easy to qualify based on a few factors. Online lenders typically offer three loan types that are customizable to your business needs.

Working Capital Loans: These loans can help you 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.

Compared to traditional loans, online lenders typically have easier-to-meet qualifications and fast processes. Many applicants can get up to $500,000 in as little as 24 hours.(1)

5. Women-Focused Business Organizations

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

WBC : These centers act as valuable guides, offering resources and training to assist female entrepreneurs in starting and growing their businesses. Many regions have their own local organization, so check your Chamber of Commerce to find your local chapter .

NAWBO: NAWBO is a community of women business leaders providing support, network opportunities, and essential resources for women-owned businesses.

U.S. 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. For example, Female Founders Fund is dedicated to investing in female-founded start-ups, offering financial backing and strategic support.

Angel investors are individuals who invest their own money in promising ventures. Angel investors look for businesses with solid plans, growth potential, talented teams, and market opportunities.

Pros and Cons of Investor Funding:

Pros:

• Your business receives a financial boost.
• You can leverage the industry expertise of your investors.
• You can take advantage of your investors’ network for growth opportunities.

Cons:

• You lose a portion of your control over the business.
• Investors will have certain expectations regarding business 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 take a small percentage of the business.

Incubators: Similar to accelerators, they offer ongoing support, resources, and sometimes money but usually without taking part in the business.

8. Partnerships and Joint Ventures

Joining forces with other businesses lets 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.

Similarly, a joint venture is where two or more businesses combine resources to work on a specific project or goal. 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 at the two main types of crowdfunding and the platforms associated with them:

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

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

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

Women-owned businesses contribute nearly $3 trillion to the economy, yet a significant number of female entrepreneurs report a lack of access to capital as a top challenge. 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 your financial resilience but also fosters innovation and adaptability.