SBA Loans for Women Meet a Rising Demand
Women are killing it as entrepreneurs. Over the last 20 years, the number of businesses owned by women has increased by 114% and the trend continues to increase by 4 to 5% a year.
To address and encourage this trend, the Small Business Administration has started a number of initiatives to support women-owned businesses. The Office of Women’s Business Ownership exists to run Women’s Business Centers, and help women-owned businesses find opportunities and receive training.
The SBA also has a number of loan programs, some exclusively for women business owners. For women entrepreneurs, SBA loans can be a great way to get the capital they need.
You can also register as a Woman-Owned Small Business with the SBA, which helps get more assistance. You can apply for this online or speak to an SBA representative about your eligibility.
So, what kind of loans are available for women leading small businesses?
Open to all businesses, 7(a) loans are the bread and butter of the SBA’s program. A 7(a) loan or 7(a) small loan (small means $350,000 or under) can be used for a variety of business purposes, including starting a new business, purchasing real estate, equipment, and fixtures, as well as increasing inventory or improving working capital.
7(a) loans generally have better interest rates than private loans, although they are obtained through partner organizations. The program reduces the lender’s risk, allowing banks to loan to startups and businesses they consider high risk.
Women's Business Center Loans
The SBA administers a number of Women’s Business Centers across the United States. Depending on your location, there may be a women’s business center near you.
The services they offer vary, but some offer loans directly. For example, the CEI Women’s Business Centers offer a variety of loans including regular business loans, a streamlined process for micro loans, specific funding for renewable energy products, and, for the center in Maine, sea farms.
Others will help you find appropriate loans for your business through partner lenders. As Women’s Business Centers also provide a variety of other services, it’s worth looking to see if there is one in your area.
SBA 504 Loans
SBA 504 loans are designed to provide approved small businesses with funds for fixed assets, such as buildings, land, renovation, furniture, etc. The proceeds are restricted and they are available through Certified Development Companies, which are nonprofits that promote economic development in specific communities.
504 loans are not reserved for women, but one of the goals of the program is to help expand small businesses owned and controlled by women. The goals of this program are to revitalize communities and help businesses move to areas which have a labor surplus or are affected by loss of Federal presence.
If you live in an area which has a CDC or are looking for a place to relocate to, 504 loans can be very helpful for purchasing “fixed assets.”
SBA Microloan Program
If you have a relatively small need, the SBA Microloan program can help you. Microloans in this context are defined as up to $50,000, but the average is $13,000. Money from these loans can’t be used to refinance debts or buy real estate, but is intended for things like inventory or supplies, furniture, and equipment.
Microloans are available through community-based nonprofits that often have specific missions and you may be required to do training or provide a business plan. Some of these nonprofits have a goal of supporting women-owned businesses, but the exact details depend on where you are.
SBA Express Loans
SBA Express loans are intended to serve as “bridge” loans in an emergency. If you’re having cash flow problems, these loans are typically approved within 36 hours. Like 7(a) loans, they are obtained through lenders that partner in the program. For loans up to $25,000, collateral is generally not required.
The maximum amount is $350,000. These loans are available to all lenders. The downside to the rapid approval is that the interest rate is likely to be closer to the SBA maximum.
SBA Veterans Advantage
More and more women are serving in the military. The SBA Veterans Advantage loan program is similar to SBA Express, but has lower fees. These loans are restricted to veterans, active-duty military and reservists, but are also available to spouses of any of those groups or to widows of service members who died during service.
If you fall into one of those groups, then you can get rapid turnaround with lower fees, and you can borrow up to $5,000,000. Your local SBA office will have more information, and will help you prove your eligibility for the program.
The CAPLines program is for small businesses who have cyclical working capital problems. If you meet SBA approvals and also fall into one of the four groups under CAPLine, you can borrow up to $5 million. The four programs are:
- Contract Loan: This is for contractors and sub-contractors who need to finance the cost of a contract before they are paid by the customer. You can use a loan to cover multiple contracts if needed.
- Builders Line: This is for builders who are struggling to get financing for a specific construction or renovation project. The loan is for a specific project and it must be a residential or commercial building for resale.
- Seasonal Line of Credit: This is not to help through slow periods, but to cover the costs of “starting up” at the start of the season before money comes in, and thus should be spent on inventory or labor costs.
- Working Capital Line of Credit: These loans are to cover short-term working capital and operating needs for businesses that sell on credit.
The SBA and partner lenders are not allowed to discriminate when providing loans. While there are few programs restricted to women, women can apply for SBA loans without having to worry about being turned down or held to higher standards than men. Thus, for women who are struggling to get financing for their business, SBA loans are a good option for getting loans at reasonable rates.
If you are still a little confused and are exploring your SBA loan options, Direct Payment Group can help. We can guide you to the financing you need for your business to thrive. Click on the button below to get started.