Women-owned businesses are the fastest growing segment of entrepreneurs in the United States and account for roughly 40 percent of the small businesses in our country. Unfortunately, financing for women-owned businesses can be tough to come by. According to a recent study from the New York Federal Reserve, 64% reported a funding gap.
With that in mind, here are five tips to help women entrepreneurs find greater success when looking for small business financing:
- Don’t use your personal credit to pay for business expenses: While it’s tempting for every young company to use personal credit to get things off the ground, it’s important to start building your business credit profile by using business credit whenever possible. A recent study from Experian found that women business owners are more likely to use their personal credit, and less likely to seek out commercial credit. This makes it more difficult to get larger business loans down the line, as you don’t build your business credit profile. One way to start building business credit early is to talk to your suppliers to see if they offer credit to their good customers. Additionally, take out a business credit card and use that for all business expenses rather than personal cards.
- Don’t be afraid to look outside the bank: The first place most business owners (including women) look for a loan is the bank where they have their other business accounts. Unfortunately, unless you’ve been in business for a few years, have a relatively strong personal credit score, and are looking for a relatively large loan, the bank may not be very motivated to work with you. If your business is very young, you might consider crowdfunding or non-profit lenders who often offer low- or even no-interest micro-loans. If you’ve been in business for at least a year, an online lender like OnDeck can be a good option.
- Network with other women business owners: Networking at local Chamber of Commerce events or other business networking groups can be a great way to gather tips on getting financing for women-owned businesses from other entrepreneurs. The SBA has a network of business centers across the country to help women business owners. The National Association of Women Business Owners is another great networking group.
- Learn more about business credit: To improve your business credit profile, you should first know what your profile looks like and how it is compiled. If you don’t know much about business credit, you’re not alone—the same is true for most business owners. The three major business credit-reporting bureaus are Experian, Equifax, and Dunn and Bradstreet. You can see how your credit is being reported now, and make sure your profile is accurate. It’s not uncommon for mistakes on your profile to hamper your ability to get a small business loan, so it’s important to do a periodic review of what yours looks like. Check out “8 Questions About Business Credit: Answered” for more information.
- Talk to your suppliers: Trade credit is one of the easiest and most effective ways to build a strong business credit profile. Most supplier will offer 30,60 or 90 day terms to their best customers, so don’t be afraid to negotiate favorable terms for your business. And, make sure they report your good credit history to the credit bureaus. If they don’t, you might be building good credit with that particular vendor, but you’re not doing anything to build a strong overall business credit profile.
Women business owners struggle with many of the same issues as their male colleagues when looking for financing. Although the practices outlined above might not get you a $100,000 loan from the bank today, they will help you create a stronger credit profile, build relationships with people who can help you, and improve your odds of success down the road.