The top four business industries for female-led businesses are in the health and beauty space, fitness and nutrition services, cafe and food service, and retail industries. And unfortunately, these businesses have been heavily affected by the COVID-19 lockdowns. Typically the industries women tend to be business owners in can struggle in their applications for traditional loans. Lenders tend to evaluate loan applications on cash flow and with these factors in mind; it can make it very difficult to obtain funding. Although lenders cannot discriminate against loan applicants based on gender, even successful entrepreneurs in lower-earning industries can be less likely to get the funding they require, regardless of gender.
So with this in mind, what should you look for when applying for business loans for women, and how to make sure your application is successful?
What to look for when applying for business loans for women?
Research the loan type: Before applying for a loan it is important to research the type of business loans for women that might be suitable. With the increasing amount of business loans for women and products becoming available today, you will want to take advantage of the specialist products that are aimed towards women who own businesses. This will avoid time-wasting and ensure that you get approved for the amount you need with a loan structure that suits you and your business.
Small business loans for women are basically a lump sum of money paid to a borrower; it can be secured or unsecured. Unsecured loans are easy to apply for and can be up to $150,000. It can be beneficial to small business owners as it is less risky than securing a large amount of money against an asset such as property or a piece of equipment. The interest rate can be higher; however, the repayment period is usually shorter with payment periods up to 3 years. With the flexibility whereby you can also pay it off earlier.
A line of credit works in a similar way to a credit card. When you apply for a line of credit, they will assess your income, how long you have been in business, and your credit history. This can be a great option for ongoing cash flow support as you review business loans for women. A business will get approved for a specific amount of money but the business may not choose to use it straight away. If the credit remains untouched, there is no interest accrued until funds begin to be withdrawn. A business may repeat cycles of withdrawing credit, paying it down, and withdrawing again with the line of credit remaining open until the borrower chooses to close the account. This makes a perfect option for an emergency account for business owners.
Business overdraft: An overdraft is linked to a regular transaction account and allows you to withdraw into a negative balance. You only pay interest on the amount that is withdrawn under a zero balance. One thing to consider is that along with interest payments if the overdraft is used, you will also pay monthly account-keeping fees during the period of time you are drawn into overdraft. For example, let’s say there is $500 in your business account and the weekly rent of $1000 is directly debited. The overdraft will allow your account to go into negative and now be – $500.
Research the lender: Make sure that you apply through a credible lender. Nowadays the world of Google makes this easy. Simply check online reviews of lenders to cross-check any potential problems. If other businesses have had rocky experience borrowing money from a lender, it’s likely it could happen to your business. This doesn’t mean to rule out that lender for future purposes, it may just mean they are having some teething issues with their current process. But don’t make their problems your problems and steer clear of any red flags.
Look for any hidden fees: This is an age-old trick of anybody working in the finance industry. Some lenders may charge absurd fees to set up your account, monthly account keeping fees, and penalties. You can normally find transparent online lenders as they will advertise this as one of their benefits. Using one of their online calculators during the application process can also help you to be aware of the total costs.
Look for a speedy process: When it comes to borrowing money, time is of the essence. If you have had an air fryer break down in your kitchen 24 hours before a big service Saturday night, you will need a quick injection of cash to get it repaired. You will want a fast and easy process in times of emergency. However, this can be equally great when you are faced with opportunities. Sudden opportunities for growth or expansion will require quick access to funding. For instance, a gym owner may need a loan to expand their business space quickly. So having a speedy process will help in times of crisis as well as expansion.
How to apply for business loans for women?
When you apply for any type of business loan you will need to prove that you have been operating in the same industry for at least 6 months. You will need to provide identification documents, such as a license, an ABN as well as up-to-date financial documents. You may also need to provide a current business plan to show the lender. Keep all your bill payments up to date to improve your credit score.
Once you have all your documentation ready, research the loan and lender of your choice. There are many that are providing specific and supportive business loans for women. When you have found the lender of your choice, simply apply and you should know quickly whether you have been approved or need to supply more information. If in doubt online lenders have great customer service teams that can answer any questions you may have.