Why do women entrepreneurs continue to face so many hurdles when it comes to small business funding? There are more than 11.3 million women-owned businesses throughout the United States, responsible for generating over $1.6 trillion in revenue for the economy. However, disparity continues to be a major issue when it comes to financing a woman-led startup, versus that of a man-led startup. Studies have revealed that women ask for less financing than men and receive smaller loans with higher interest rates across all loan categories.
While it’s difficult to determine the root cause, the solution lies in doing due diligence and seeking financing from outside sources. Rather than settle for the first loan offer, it’s key to look for alternate forms of funding like grants, venture capital and, yes, even a few select loans. Here’s your cheat sheet guide for getting started.
Women entrepreneurs have a wide variety of grants available for just about every industry. Fashion designer Eileen Fisher offers a Women-Owned Business Grant that provides funding for businesses beyond the startup phase that are ready to expand and make a positive impact on the environment and society. The Amber Grant from WomensNet was created to help women achieve their entrepreneurial dreams. Aspiring jewelers can apply for the Halstead Grant. And Walmart’s Global Women’s Economic Empowerment Initiative is committed to increasing sourcing from women-owned businesses. These are just a handful of the many, many grants available to women entrepreneurs.
Grants of all shapes and sizes are available in various locations and industries, and for various entrepreneurial backgrounds. A small business that receives a grant may never have to pay it back, but that doesn’t mean that it’s free money.
When exploring grants, keep these points in mind:
- Qualifying for a grant is a competitive process. Submitting an application doesn’t necessarily mean you will win.
- Many grants come with eligibility guidelines to follow before applying. So, take the time to follow directions, be creative where possible and highlight what makes your business unique.
- Remember to do your research thoroughly and beware of any fake grants that may ask for your bank account information or processing fees.
Venture capital (VC)
Recent years have seen an explosion in venture capital firm creation, especially for those that support women entrepreneurs. There’s BBG Ventures, funding businesses run by entrepreneurial women in the tech market; the millennial-friendly SoGal Ventures; and the Female Founders Fund, which is invested in women-led businesses currently disrupting their respective marketplaces, just to name a few.
Here’s what to know about venture capital:
- VC firms back high-growth companies early on with equity funding. In return, the entrepreneur gives them a stake of their business, like shares or an equity position.
- Venture capital is ideal for young, innovative startups.
- More and more women partners are joining venture capital firms and taking a seat at the table. This puts them in a position to invest in female-driven startups and give back to women entrepreneurs in need of funds.
No high-interest loans here — instead, we’re going to talk a little bit about microloan and short-term options. If you truly believe it is in your best interest to take out a loan, you may look toward a microloan for support.
Unlike traditional term loans, microloans are small, targeted amounts of capital that are affordable alternatives for small business owners. One great example of microloans and microlending is Elizabeth Street Capital. This initiative, established between the Tory Burch Foundation and Bank of America, provides women entrepreneurs in the United States with access to affordable loan opportunities, along with networking and mentorship support.
Short-term business loans are another available alternative for entrepreneurs. For those in need of a small amount of capital, short-term loans can help cover financing needs quickly without pulling every dollar out from your emergency fund. Short-term loans are perfect for just-launched startups and any entrepreneur lacking strong credit.
No matter which funding option an entrepreneur chooses to pursue, it’s important to remember the first solution that presents itself may not be the best, or only, available avenue. This is good advice for all small business owners, male and female, but it’s especially important for women entrepreneurs to keep in mind.
Deborah Sweeney is the CEO of MyCorporation.com, which provides online legal filing services for entrepreneurs and businesses, startup bundles that include corporation and LLC formation, registered agent services, DBAs, and trademark and copyright filing services. You can find MyCorporation on Twitter at @MyCorporation and Deborah at @deborahsweeney.