Women leaders and small-business ownership go hand-in-hand in today’s entrepreneurial-forward market. Research shows nearly 40 percent of firms in the United States are women-owned (51 percent of the business owners are female). These small firms pack a big punch as they employ close to nine million employees and have generated more than $1.7 trillion. Research also reveals the number of women-owned companies seeking funding has increased by 130 percent in recent years.
There are numerous factors impacting the growing popularity of female entrepreneurship. Favorable economic conditions make it easier than ever for individuals to secure loans with low interest rates. Also, mainstream financial institutions often look at only the past three years of credit history to approve a small business loan, making it viable for emerging entrepreneurs to tap into the funds they need to create a thriving company.
As a small business leader, it’s crucial that you have adequate access to capital to keep your company afloat. Even the most successful companies take out loans to fund their operations. These loans are often the foundation on which developing small business owners build their success.
We’ve put together a guide outlining the main types of small business loans. Our goal is to make it as easy as possible for budding entrepreneurs to access the capital they need to not only build a successful startup but to continue to grow their operations along the way.
Less Than a Year of Business History
As a general rule, lenders want to see a strong history of proven success before granting small business loans. For many new business owners, especially those with less than a year of business history under their belt, this can make it difficult to qualify for a loan. Fortunately, you’re not out of luck. You can still tap into funds to support your new small business by taking out a personal loan. Many online lenders offer unsecured personal loans to individuals — meaning you don’t have to put your home or vehicle up for collateral in order to secure the money. Rather, your qualification is based on the trustworthiness of your financial house, which includes factors such as the strength of your personal credit score and how much you earn each year. Some lenders even provide invoice financing, making it simple to repay the loan as your business starts turning a profit.
A business credit card is another good option for new business owners. Cards offered through First United Bank & Trust provide a number of perks, like unlimited one percent cash back on net purchases, one point per dollar on net purchases, and attractive rates based on your creditworthiness. Your earned points never expire, and you can redeem them on the rewards you love most, like merchandise, cruises, hotels, or airline tickets. To top it off, there are no blackout dates.
Small Business Association (SBA) Loans
The SBA is a government program that offers small-business entrepreneurs numerous resources to help them succeed. The Small Business Association program doesn’t grant loans, but it will subsidize a portion of the loan if you were to default. Because of the government guarantee aspect of SBAs, lenders are more apt to give you a loan, even if you’re a new business owner who is just starting out. Even better, these loans come with attractive interest rates, along with convenient long-term financing options.
There are several types of SBA loans, including:
- SBA microloan program: Great for startups and micro businesses; access up to $50,000 in capital.
- SBA 7(a) loan program: Suitable for entrepreneurs that have several years of successful business history; access general purpose working capital.
- SBA 504 loan program: Excellent for accessing money to purchase commercial real estate or equipment.
Business Line of Credit
Business lines of credit are especially ideal for business owners who want maximum flexibility in how they are able to utilize the funds. Those accessing this type of loan often work in industries with cyclical revenue cycles. With a business line of credit, you are given a maximum credit line, but you are not required to use all of the funding at once. Rather, the enhanced flexibility of a business line of credit allows you to borrow money as you need it. And instead of paying interest on the full line of credit, you only pay interest on what you actually draw. Essentially, it’s like a credit card. As you pay down what you draw, you can continue to re-borrow as needed up to your maximum credit line.
First United offers a unique line of credit program that allows business owners to tap into working capital. Flexible repayment plans make it easy for small business leaders to pay off their debt. You can use your line of credit in any way you see fit, like funding your payroll, buying supplies, ordering inventory, or buying equipment.
Learn More About the Best Small Business Loan Options for Women
First United wishes you the best of luck in all of your endeavors as a small-business entrepreneur. Remember not only to compare APRs on your various loan options, but also to calculate the true cost of the loan by taking into account its total amount of fees. Your personal and financial preferences and business needs will influence which small business financing option you decide is best for you.