Funding Guide for Female Entrepreneurs
Starting a business is a difficult task no matter what. It involves immense amounts of commitment, skill and, of course, money. The task can be an especially difficult one for women. As most entrepreneurs are men, and women are still in the minority, they often lack the type of support network available to their male counterparts.
This challenge has caused the government and other organizations to reach out specifically to female entrepreneurs, offering educational and monetary resources. The U.S. Small Business Administration is the top resource for female entrepreneurs and specializes in backing small business loans.
Small Business Administration
The Small Business Administration (SBA) has several loan programs that can help anyone fund a new business. Through these programs, entrepreneurs can take out loans that are backed by the SBA. This essentially means the government is acting as a co-signer for the loan rather than a lender. Such an arrangement helps borrowers achieve lower interest rates on larger loans.
Loans through each program have different eligibility requirements and different lending terms. Most programs have credit requirements. As with a personal loan, you must have a good credit history to be eligible for a small business loan. This signifies to the lender that you are a trustworthy borrower and are likely to repay the loan in full and on time. The higher your credit score, the lower your interest rate is likely to be. This will save you money each month and allow the loan to work harder for you.
Although any entrepreneur can apply for an SBA-backed loan, the group is a particularly useful resource for women. In fiscal year 2009, the organization backed $2 billion of loans to nearly 10,000 women entrepreneurs. SBA-licensed intermediaries lent another $14 million to businesses owned by women.
In addition to offering loans to women entrepreneurs, the SBA has Women’s Business Centers throughout the country. The centers offer resources beyond small business loans such as entrepreneurial training and information.
The SBA should be any aspiring entrepreneur’s first stop, but it is by no means the only resource available. Female entrepreneurs should apply for government grants, which are even more desirable than SBA loans since they don’t require repayment and don’t rely on your credit history. You should also check with your state or county Department of Development, which is often willing to provide financial support and business tips.
If such resources aren’t enough to cover your anticipated bills, consider taking out a private loan. This is not an ideal solution, as it will typically come with a higher interest rate than an SBA loan, even if you have good credit. However, it will help you pay expenses and get your small business up and running.
You can also look into using a small business credit card. As with other loans, this requires a credit check, and your exact borrowing terms will depend on your credit history and score. Even if you have a good credit score, the interest rate on a credit card is typically greater than that of an SBA or private loan. However, it does have one advantage: with a credit card, you can borrow as you go. This means you’ll only pay interest on the money you’ve actually spent. This is in stark contrast to borrowing a traditional loan, for which you receive a lump sum and pay interest on all of it, despite whether you use it all.
Even if you secure grants and other funding for your small business, you’ll most likely still need to take out one or more loans to cover all your company’s needs. Although you aim to turn a profit within a certain amount of time, there’s no real guarantee that your company will meet your goals. When you take out a loan, it’s therefore important to think about both your goal and less successful scenarios. Make sure you do not take on more debt than you can reasonably repay.
Once you take out a loan and know your exact borrowing terms, set up a budget for your business. Be sure that you can meet basic expenses, such as payroll and equipment costs, while making minimum monthly payments on any loans.
Many new business owners find that, at first, a company’s earnings are not enough to cover its expenses. In these cases, some opt to pay their businesses’ bills with their personal savings. While this can work for individuals on solid ground, it is a risky maneuver for people who are already struggling with their personal expenses.
For this reason, experts say it’s a good idea for you to eliminate your personal debt before going into business. If you’re eager to start your company and want to cut your debts fast, look into debt settlement. This strategy can get you out of debt within months and for a fraction of the amount you owe.
Katherine Pilnick writes and blogs about personal financial well-being and issues that influence it for Debt.org, America’s Debt Help Organization.