If you’re a female business owner searching for financing, you may be able to score funding through the U.S. Small Business Administration. The SBA, which offers several loan programs, is actively working to boost SBA loans for women.
Last year, SBA loans under the agency’s flagship 7(a) loan program were up 22% for women, and hit an overall record $23.5 billion in lending dollars. According to the SBA, the organization helps all small business owners, including women, raise funds to start or grow their businesses. Although the SBA doesn’t discriminate when lending, it has a vested interest in helping get more SBA loans for women.
Why? Because men have an easier time accessing funding than women, and the SBA would like to help level the playing field for women entrepreneurs who face obstacles in the business world.
According to the SBA, only about 7% of venture capital funding in the U.S. goes to women. And take a look at this: A Harvard Business School study asked potential investors to rate a series of business pitches—some narrated by women and others by men. Even when read the exact same scripts, 32% of the investors said they’d fund the women, compared to the 68% who would finance the men.
SBA Loans for Women: Women’s Business Centers Help Female Entrepreneurs Succeed
When it comes time to seek a loan for your startup or growing business, it can be challenging to navigate all the funding options available. Fortunately, the SBA’s Office of Women’s Business Ownership (OWBA) oversees a network of women’s business resource centers throughout the United States that help with the funding process. The more than 100 Women’s Business Centers (WBCs) also offer a myriad of other services for women business owners, including training and business consulting. If you’re looking into SBA loans for women, other financing options, or just education in general, the OWBA is a good place to start.
Some WBCs also offer networking opportunities, mentoring, and certification courses for all women, regardless of their ability to pay, according to President and CEO Susan Rittscher. To help women better understand the resources and loans available through the SBA, one such WBC called The Center for Women & Enterprise (CWE) in Boston holds free educational events, like the upcoming Explore SBA Resources workshop on January 8th.
CWE receives funding from the SBA to run its centers in Boston, as well as in Worcester, Ma., Providence, R.I. and Nashua, N.H. The center is a big proponent of SBA loans for women, as they give women access to low-interest loans that they might not otherwise qualify for. At the same time, CWE helps female entrepreneurs source out the best type of funding for their particular businesses, says Rittscher.
“We help women identify the right sources of capital. It could be funds from savings, friends, or family. We have several relationships with banks and finally, we have a relationship with the SBA,” she says.
For women in the early stages of starting a company, CWE has a microloan fund in Rhode Island that lends up to $5,000 to help jump-start businesses. As businesses grow, CWE even helps women identify angel or venture funding.
According to the SBA, women who take advantage of the agency’s resources, such as its WBCs, are more likely to succeed in business. In fact, 33,500 entrepreneurs have been successful with the help of CWE since it opened in 1995. Although SBA loans for women are a priority for the government organization, its other resources and initiatives shouldn’t be disregarded either.
Where to Find SBA Loans for Women
Although there are many financing options available for women, SBA loans for women are often the way to go, since they’re typically the least expensive. Regardless of whether you work with a local WBC or apply for an SBA loan on your own, it’s important to understand what types of loans are available to you. Here’s a basic primer on the three SBA business loan programs:
SBA Loans for Women: 7(a) Loan Program
Under this program, you can use the financing for a wide variety of business needs, including day-to-day operational costs and expansion. Loan proceeds can be used for everything from buying or leasing buildings, to purchasing equipment, to meeting payroll expenses.
Lenders can loan a maximum of $5 million under the 7(a) program. Although there’s no minimum loan amount, the average loan amount in fiscal year 2015 was $371,628: up 10% from the last reported average of $337,730 in fiscal year 2012, according to the SBA.
Before you set out to apply for a 7(a) SBA loan, it’s important to note that the SBA doesn’t actually loan money. Instead, SBA-approved lenders fund the loans. The SBA, in turn, guarantees up to 85% on loans up to $150,000 and 75% on loans in excess of $150,000.
Where Do I Find A Lender?
To locate an SBA-approved partner, you can go online to visit SBA Linc, a service on the SBA website that connects you to participating lenders in your area. About 300 lenders participate in the program nationwide. After filling out the online form, you’ll hear back from a lender in two business days.
If you want to talk to someone in person, you can also go to one of the agency’s local offices or contact your area WBC.
SBA Loans for Women: Certified Development Company (CDC)/504 Loan Program
If your business needs funding for real estate or equipment, a CDC/504 loan might be the best loan for you. The SBA specifically runs this program to help companies fund the purchase of major assets like property and equipment. There are restrictions in order to qualify for a CDC/504 loan, so before going any further, check that you meet the following criteria:
- Funds have to be used for financing real estate and equipment.
- You must be a for-profit company and an eligible type of business.
- You must operate in the United States.
- Your net worth should be less than $15 million and your average net income should be less than $5 million after taxes for the last two years.
- You should be deemed able to repay the loan from your projected operating cash flow and provide the SBA with a personal history from all principals in your company.
- You should have management expertise and a feasible business plan.
Where Do I Find a Lender?
If you’re eligible for a CDC/504 loan, you can apply through either an approved lender or a CDC, which is a non-profit company that contributes to the economic development of its community. CDCs are located all over the U.S., and they work hand-in-hand with the SBA and lending partners to provide businesses with long-term, fixed-rate loans. Your area WBC is also a great resource to help you connect with a CDC.
SBA Loans for Women: Microloan Program
The SBA microloan program provides loans up to $50,000 and is ideal for women with small, growing companies, as well as certain types of not-for-profit childcare centers. The average microloan is about $13,000, according to the SBA. To qualify for a microloan, the funds can’t be used to pay off debts or to buy real estate. Instead, you should use the funds for:
- Working capital
- Inventory or supplies
- Furniture or fixtures
- Machinery or equipment
Where Do I Find a Lender?
The SBA provides funds for these microloans to intermediary lenders, which are nonprofit, community-based organizations. The SBA’s list of the top 25 microlender intermediaries is a good place to start your search for a lender. And, of course, your local WBC office is a valuable resource to help you decide on the best SBA loans for women.
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from Fundera Ledger https://www.fundera.com/blog/2016/01/05/sba-loans-for-women/