Business Loans for Women

If you’re a woman in business looking for start-up funding or currently running a business that requires extra funding, read on. We’ll cover many aspects of the business sector, including current statistics and what you’ll need to give your loan application the best chance of success.

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Business loans for women 

Women now account for approximately 33% of all entrepreneurs, up from 17% in 2015, nearly doubling in less than a decade. Female entrepreneurs tend to run one-person micro firms, and many are run on a part-time basis.

Business loans for women come in many forms and sizes, and over recent years lenders and brokers have made inroads in connecting with this previously overlooked niche.

Lenders actively target women for small business microloans because, as making trends have shown, they tend (as a demographic) to apply for smaller amounts.

Small business loans for women, the facts

This helpful link covers the state of female entrepreneurship in the UK, the figures are from 2020, and are the latest available, drilling down into gender issues concerning female business.

Women account for close to one-third of all SMEs in the UK. Female entrepreneurs primarily tend to run one-person firms; with women founded enterprises accounting for just 23% of all businesses employing more than four people.

Scotland is the UK nation with the highest level of women-owned businesses, closely followed by England and Wales.

The most recent Rose review covers many of the issues facing women in business, including why women appear marginalised when applying for funding. The research found that female-led firms receive less funding than those headed by men at every stage of their journey, suggesting that financing is a potential stumbling factor that inhibits scale.

Catherine Lewis La Torre is the CEO of the British Business Bank, and delivers some exciting pointers in the foreword in the bank’s latest SBFM survey (Small Business Finance Markets) for 2020/21. 

It’s the seventh annual British Business Bank Small Business Finance Markets report, setting out the latest evidence on how financial markets support smaller businesses and help them improve productivity and growth in the UK economy.

Government loans and grants for women to start businesses

There isn’t a specific government loan scheme that exclusively caters for women in business. Still, many government loan schemes may be suitable for female entrepreneurs depending on which stage their business is at.

The Recovery Loan Scheme requires no security or personal guarantee and awards up to £250K. The minimum loan considered is £5K. 

Apply for RLS funding

It’s easy to overlook the palpable boost the RLS has had on business lending since its launch late last year. Offered in aid of businesses affected by the COVID-19 pandemic, the scheme offers massive support to both firms and lenders, who have the scope to tailor the loan to match the needs of both parties.

Various funding options are available in the UK to raise the capital needed to move a business forward, and acceptance of these grants may encourage a lender to support the application.

Business loans for minority women

According to the latest UK government data, approximately one in five government loans have gone to Black, Asian and ethnic minority entrepreneurs through the Start-Up Loans programme.

This initiative is aimed at tackling inequality in society by ensuring that people from all backgrounds have equal access to the funds needed to start a small business.

At the time of the government survey, nearly 8% of ethnic minorities found themselves starting or running a new venture compared to 14.5% of the white population.

According to the data, 15% of UK workers were self-employed. Pakistani and Bangladeshi workers were the most likely ethnic minority to be self-employed, while Black workers were the least likely.

While fewer Black and ethnic minority entrepreneurs exist in the UK, the data shows that entrepreneurs from ethnic minority backgrounds received start-up loans at a higher rate; 5.7% of Black entrepreneurs per 10,000 people received start-up loans, compared with 2.4% white entrepreneurs per 10,000 people.

How are banks helping women in business?

We previously mentioned the Rose Review and the British Business Bank’s efforts to promote female entrepreneurship. Several high street banks have made great strides in reaching out to women in business. Barclays has created a specific section on their website which offers all kinds of advice and tips. There’s a female founders forum, a life skills section, and regular business labs designed exclusively for women.

The bank has also teamed up with TechStars to create the Female Founders First programme. It is an opportunity for thirty global, female-led tech companies to access mentorship through a range of online events and products, helping them prepare their start-ups for the next phase.

Is it harder for women to get business loans?

There could be gender discrimination; however, some statistical factors at play might limit women from getting business loans that we’ll discuss here. 

Having an awareness of such issues and barriers might help you overcome any lender objections and encourage a fine-tuning of your business plan before a funding application. So, let’s look at five common issues.

  1: The risks in retail

Many women-owned businesses are in the retail sector, which lenders may consider a higher risk. Retailers often have lower revenues, higher expenses, and lower profit margins per sale than service industries. 

For those already operating, or seeking to start a new enterprise in the retail sector, take a look here to discover what finance is available to business owners looking for support.

 2: Lack of business experience

A chicken and egg situation exists here. Fewer female entrepreneurs have experience running a business. So, when it comes to granting loans based on experience and a track record, female entrepreneurs might experience pushback. This landscape will, however, change as the amount of successfully female-led businesses increases.

In the meantime, why not look at our guide on how to create a detailed project plan covering every crucial aspect of your business. Outlining why you need finance, what it’s for, how much, and over what term. Having something like this in place before you apply will encourage lenders to view your professional approach with the right level of consideration.

 3: Low credit scores

There is a bias where credit scores are concerned; if women take out fewer loans for mortgages, cars and businesses, they could have lower credit scores. Not because they’ve defaulted on payments, they just won't have a credit record by which a potential lender can make a lending decision.

There is a positive angle to a lower credit score since women running SMEs tend to aim for lower funding requirements. They’ll mostly apply for personal loans to start or fund an existing business. Applying for smaller loans can mean a lack of earlier credit, which won’t always hinder an application.

If your business credit rating is low, there are things you can do to improve it. It's also useful to remember that credit ratings and scores are just one of the things lenders assess when building a picture of your business.

4: Lack of security and collateral

Women tend to have less security to offer up as collateral for a business loan. Fewer women own their own homes and those that do tend to hold joint mortgages with partners. 

However, this issue mainly concerns larger loans, and because women aim for lower amounts to start or fund their businesses, collateral isn’t always a necessity. As a company director, you might also consider offering a personal guarantee as an assurance for a business loan or another source of credit.

 5: Lower business revenues

Lenders will look at the cash flow forecasts of a possible start-up or the current revenues to prove that the potential borrower can meet the loan repayments. Women tend to run smaller businesses with lower incomes, so they might find it trickier to prove they have the profitability to pay back the repayments.

These five issues can get addressed in your business plan and your application, and it’s up to you to make a positive case to encourage the lender to say yes. What can you do to ensure your application has the best chance of success based on the factors previously listed?

·  Do you have the relevant experience?

·  Are your projections realistic?

·  Do you exist on the voters’ roll?

·  Can you offer collateral if needed?

·  Can someone guarantee your loan?

Once you’ve decided to make your application through us at Funding Options, our team of specialists will offer any help to further your business ambitions. 

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Business Loans for Women

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