Women now own 42 percent of businesses, and in 2019 they created millions of new jobs and generated approximately $1.9 trillion in revenue. If you are a woman running a small business, you may find yourself needing more capital to help your business grow and thrive.
When someone needs more capital for their business, the first place they usually turn to is the bank for a small business loan. However, it can be difficult to get a business loan from a bank, and you might need to explore other options. Thankfully, there are plenty of other ways a woman-owned small business can gain access to more capital. In this article, we will explore all funding options available to women who own small businesses.
Private Small Business Grants for Women
Grants are an excellent source for gaining access to more capital that is often overlooked. There are two types of grants: private grants and government grants. First, let's look at private grants for women. Private grants are grants that are offered to businesses from various private companies and organizations. While applying for grants can be time-consuming, the amazing thing about grants is that they are essentially free money. The difference between a loan and a grant is that you never have to pay back the money you receive from a grant!
However, grants often are given for a specific purpose, and you are expected to only spend the money on that purpose. For example, if you say in a grant application that you intend to use them more for the research and development of a new product, the grantor expects you to only spend the money on that. You can also get a startup grant to help you get your new business set up and running. Now that you know more about how grants work let’s look at some examples of small business grants for women business owners.
Where to Find Private Grants for Women
- The Amber Grant was founded in 1998 by WomensNet to honor the memory of Amber Wigdahl, who died at age 19. The Amber Grant is $10,000 and is awarded monthly. You just need to speak from the heart in your application.
Cartier Women’s Initiative Grant
- The Cartier Women’s Initiative Grant is available to women business owners all over the world. The winner for the grant receives $100,000, and the two runners up each receive a $30,000 grant.
Fundid’s Grant Marketplace
- There are many more private grants available for women with small businesses. You can find them by searching our Grant Marketplace.
Government Grants for Women Entrepreneurs
Government grants are similar to private grants; the only difference is that instead of a private organization providing the funding for the grant, it comes from a governmental organization. There are grants available on the federal, state, and local levels for women entrepreneurs. As is the case for private grants, a government grant is given for a specific purpose, whether it is to help you expand your business or for a startup grant.
Where to Find Government Grants for Women
- Grants.gov is a database with federal grants for small businesses. To apply for a grant on grants.gov, you need to:
US Small Business Association
- The US Small Business Association (SBA) offers small business grants to companies all over the country. They offer grants for everything from COVID-19 relief to scientific research and development. You can also contact your Local SBA Chapter for support, like counseling on grants, tools to help you achieve success financially, and more.
The Grant Marketplace
Fundid’s Grant Marketplace can connect you with grants, both private and federal and has the tools to help guide you through the entire process.
Small Business Loans
A small business loan is probably one of the first things you think of when you need to gain access to more capital for your business. A small business loan is funding that is given to you by a lender, who you have to pay back over time in monthly installments that collect interest. There are a few ways you can obtain a small business loan.
The most traditional option for seeking out a small business loan is to visit the bank. This can be a commercial bank, local bank, or even a credit union. When you take out a loan from a bank, your interest rate is usually locked in, so you will not have to worry about them fluctuating with the economy. These loans can be larger; when getting a loan from a large commercial bank, it can be harder to qualify for them.
There are some banks that are backed by the SBA, which usually come with a lower down payment and interest rate, as well as longer repayment terms. They are often harder to qualify for, but they are worthwhile to look into.
There are a lot of online lenders these days that provide loans directly to the owners of small businesses. These loans are usually faster to get approval for than a bank. However, they can be more expensive to pay back. It is not recommended to get a loan from an online lender unless you need cash fast and are unable to qualify for a loan from a bank.
Peer-to-peer lending tends to be easier for a business to qualify for than a traditional loan, because the money is coming from a group of investors. However, peer-to-peer lending usually has a much higher-interest rate than a bank does, making it more expensive to pay back. The way that peer-to-peer lending works is that a website is the middleman between you and the investors. You create your request for a loan, and the website sends it to investors with the funds to cover what you are asking for. Your loan payments go to the investors and are issued through the website.
How to Get Started with a Business Loan
- To qualify for a small business loan, you want to have a good personal credit score and a good business credit score. Those are key to helping you get loans. Check your credit score before you begin the application process.
- You should spend time learning the requirements of the loans you are applying for, so you can include everything, and you will not waste time applying for a loan that you do not meet every requirement for.
- You need to have a business plan to show lenders what you intend to do with the money you will get from the loan.
- If you need collateral for the loan, take time to determine if you have anything that you can put up as collateral and understand the risks of doing so.
Business Line of Credit
A business line of credit can offer a female entrepreneur more flexibility than a traditional loan does. With a line of credit for your business, you are given a limit that you can borrow up to, usually between $1,000 and $250,000. While a loan gives you all of the money at once, a line of credit is more like a credit card; you can borrow what you need now and make payments based on that. You can usually get lines of credit through a bank or credit union. These can be difficult to qualify for since you need good credit scores, both personal and for your business, financial statements, and to be in business for at least two years.
Business Credit Card or Charge Card
A credit card for your business can help you purchase supplies and build your business credit score. There is also a business charge card, which is different from a credit card. Both can be obtained through a bank or a credit card company, and they are both designed to allow you to purchase day-to-day supplies. However, there are some key differences between a business credit card and a charge card.
- Credit cards have a set spending limit. Charge cards for no have a set limit; the limit can fluctuate depending on payment history, frequency of use, and the business' financial health.
- Credit cards allow you to keep your balance from month to month as long as you make payments. Charge cards must be paid in full every month.
- Both have late fees, but credit cards only charge them if you pay late. Charge cards will give you late fees if you do not pay the full balance every month.
- Charge cards have high annual fees, whereas credit cards are much lower.
- Credit cards are available for a range of credit scores; charge cards require high business credit scores.
Business Building Card
A business building card is a payment card with the specific purpose of giving businesses access to capital to grow their business. It is a card that you can use for your everyday business expenses just like you would a credit card, debit card, or a charge card. Unlike these options, a business building card doesn’t just give you funding for your current business expenses but also helps you grow your business by giving you more access to capital as your revenue increases.
Another way that a woman business owner can gain access to more capital is through crowdfunding. With crowdfunding, you are asking a large group of people to provide funding to your business in a certain timeframe.
One way crowdfunding is used is if a business wants to launch a new product, they can put together a campaign on a crowdfunding site that allows people to back the project, and if you reach your goal amount, at the end of the period, you receive the money and can begin developing it. When it is done, you send the rewards to your backers and have money to launch the product on your site. They are essentially donating the funds to help you get started and will eventually get to see some sort of reward for it. The donation model is common for individuals who need help paying medical bills, school tuition, and other things along those lines; in those instances, the backers do not expect anything in return; they are just doing a good deed.
The form of crowdfunding is investing. With investment crowdfunding, a business seeks capital by selling shares of the company either in the form of debt or equity. These backers have the potential to get a financial return from the project.
Getting Started with Crowdfunding
When you decide to start crowdfunding to gain access to more capital for your business, the first thing to do is research the websites and determine which one is best for you. You will need to put together a compelling campaign with images of your products and any rewards your backers will receive. The most common timeframe for a crowdfunding campaign to run for is 30 days. It can be a beneficial way to obtain additional funding for your business, but if you use the donation model that includes some sort of product, make sure you can deliver in whatever timeframe you give for the completion of the campaign. You will need a strong social media presence to help get the word out about your project.
Many crowdfunding websites are all or nothing, so if you do not reach your funding goal, you will not receive anything. Less than half of all crowdfunding campaigns reach their funding goals, so do not be disheartened if you do not succeed. You can always try again.
Do your research and read FAQs on a crowdfunding site before you launch your campaign. Are there others in your industry on this platform that are succeeding? Then this may be where your target audience is. If you know other business owners who have succeeded on a platform, you can ask them to send out an update to their backers featuring your project. This helps spread the word among people who may be more likely to back your project.
When these projects succeed, they can be highly beneficial to your business and give you the funds you need to grow and thrive. These are not something to bank on, though, so having additional funding ideas as well in case this does not work.
Venture Capital Firms
Venture capital firms are investment firms that will fund and mentor businesses, usually startups or newer companies that are usually in the tech industry. A woman business owner has a good chance at getting investors this way since many firms want to help diversify the business world.
Some good venture capitalist firms to help women gain access to more capital are:
Grow Your Business With More Capital
There are many different ways to get capital to fund the growth of your business rather than the traditional route of going through a bank for a loan. If you are looking for grants to help your small business gain access to more capital, sign up for Fundid's Grant Match Program. We will send you a list of grants that match your business and needs and send you new grants as they come up. We also give you access to the information to help you find, apply for, and win grants. You can also search for grants in our Grant Marketplace.
Fundid is on a mission to get women-owned businesses the funding they need to grow so that we can all close the business wealth gap. While 42% of businesses in the US are owned by women, they only account for 4% of revenue generated by private businesses. We spend our time at Fundid thinking about what the world would look like if women also generated 42% of revenue and how to get them the capital they need to make that happen. Fundid is creating new ways to get small businesses the capital they need to grow and is built from the feedback of women entrepreneurs.
Editor’s Note: This post was originally published on September 30, 2020 and has been updated for accuracy and comprehensiveness.