Women Opening New Businesses Are Using These Alternative Financing Options
While traditional brick and mortar brick loans will always play a role in bankrolling new businesses, alternative financing options are rapidly diversifying and becoming more and more mainstream. Traditional funding sources have catered themselves specifically towards prime candidates, those with very high personal and business credit scores, significant business experience, as well as valuable assets that can be used as collateral. This lending model creates significant barriers for new entrepreneurs, especially groups such as women and minorities. Though nearly a third of new businesses are now established and run by women, less than five percent of the total dollar value of traditional bank loans are issued to women.
The list of alternative financing options for women is growing constantly. Many women find success by applying to many different programs at once, tapping into several streams of investments at once.
Small Business Association Backed Loans
Programs such as the Office of Women’s Business Ownership (OWBO) which operates through the Small Business Administration (SBA) works to connect women one on one with local and governmental business resources. OWBO is geared specifically towards low income women who may face additional hurdles in applying for loans.
The OWBO may assist women in applying for a loan backed through the SBA. Though the SBA does not offer loans itself, it does partner with banks to guarantee up to 90 percent of a loan, making you a much safer choice for traditional lenders. As long as you have a solid business plan to present and good business credit standing, you are much likelier to be approved for an SBA backed loan than a traditional loan. The final outcome is typically a lower interest rate and longer repayment terms.
Other Alternative Financing Options
Other options include grants which may be offered on a local, federal level. Many grants are also available in the nonprofit sector. Programs such as peer to peer lending and crowdfunding move even further from the traditional model, connecting individual donors and financiers with business owners on a case by case basis.
Local services which are often chronically untapped can be uncovered by contacting your library, the business department of your local college or university, or through your resident Office of Women’s Business Ownership. These groups often have a deep understanding of alternative financing opportunities specific to your area, and are typically staffed by people with a passion for connecting underserved groups to resources.
This growing array of financing options has allowed millions of women to become financially self-sufficient. Research your options to learn how you can finance and grow your business.