Female entrepreneurs are steadily evening out the playing field when it comes to founding businesses. However, they are unfortunately still in the minority and are generally more likely to be denied financial backing.
According to a 2020 report by UENI, 32.37% of UK businesses are owned by women, having been 17% in 2016. Therefore with more female entrepreneurs rising to prominence, being aware of what business finance is available and how you can qualify can boost your chances of being accepted.
What is a Business Loan for Women?
Business loans for women are a type of business finance that is in place to help female entrepreneurs start up and develop their companies.
What types of business loans are available for women?
There are various business loans that can help aspiring businesswomen, including, but not limited to, the following:
- Unsecured business loans – These mean that you do not have to secure your assets against the loan, but they have higher rates of interest.
- Secured business loans – These are the opposite as you secure the loan against collateral such as property or equipment, but they have higher borrowing amounts and lower interest rates as there is less risk.
- A merchant cash advance – This is where repayments are based on sales made by card payments which would be a pre-agreed percentage.
- Asset Finance – This allows you to unlock the cash in your business assets to hire new equipment which you can buy at the end of your term.
- Business lines of credit – These are much like a credit card as you can access the funds as and when you need them. You repay the money over an agreed period with your lender.
How Can I Get a Business Loan for Women?
There are so many options and providers of business loans for women, so, understandably, you may feel overwhelmed. However, investing time into researching is crucial as you want to find the best fit for you and your investment.
A good place to start is applying with high street banks or reputable lenders. It’s worth noting that the amount you can borrow will be affected by factors such as your credit score and the type of loan.
How to Apply for a Business Loan for Women?
For most business loans for women, you can apply with an online form. What you will be required to provide may vary from lender to lender, but generally, you’ll need to provide at least some of the following:
- Your business name
- How long you have been in business
- The amount you are looking to borrow
- Your average monthly turnover
- Your company number (if applicable)
- Your registered office address (if applicable)
Next, you’ll be asked to provide your contact details and information on your position in the company. This is generally the initial stage of the application process, after which your lender will contact you with any next steps.
You may be asked to write a business plan. This should cover your strategies for future objectives, how you intend to use the money and any background on the business. During this stage, consider detailing your background if you have a small business, such as if you have studied in the industry or have any other experience.
What Can I Use My Women’s Business Loan for?
Typically business finance is to help women-owned businesses be able to grow their company. Whether you are starting up a business, looking to expand the premises, relocate, or purchase new equipment, there are many purposes you can use your small business loan for.
What Are the Costs of a Business Loan for Women?
When you start considering small business loans, it is important to remember that there are always costs involved, and you should think carefully about what you wish to prioritise.
Firstly, remember you will have interest rates that vary widely depending on the type of loan you have and the lender. For instance, a traditional bank’s average interest rate will fall between 2 and 13%.
You should also consider other fees such as setting up the loan and other factors. Lenders may charge origination fees to cover the costs of underwriting and processing the loan. These are usually at 0.5 to 5% of the loan amount. You may also encounter draw fees from smaller lenders.
Keep in mind the repayment terms, such as if you are paying a fixed monthly rate. Likewise, don’t forget if you have made a personal guarantee or put collateral forwards as security.
Do I Qualify for a Business Loan for Women?
The requirements for small business loans for women will differ between lenders and with each loan type. However, to qualify for most loans:
- You will need to be a female business owner of at least 18 years old.
- You must have been trading for at least six months and with a minimum of £5,000 in monthly turnover.
- The business must be registered in the United Kingdom.
Do I Have to Provide Security to Receive a Business Loan for Women?
This will depend on the type of business finance you are applying for. The reason lenders want security is so that in the event you are unable to repay the loan, they can take the security as collateral, so they risk less by dealing with you.
Usually, loans that require security have lower interest rates, whereas those that do not have higher interest rates as the lenders are then taking more risk.
The loans that you usually have to provide security for include:
- Secured loans
- Asset finance
The loans that you typically do not have to provide security for:
- A business line of credit
- Merchant cash advance (also known as a business cash advance)
- Unsecured business loan
Start-Up Business Loans for Women
Female business owners can also apply for a Start-Up Loan through the government’s website. Unlike other loans we’ve covered, these are a type of personal loan and therefore do not entail security.
These have a fixed interest rate of 6% per year, where entrepreneurs can borrow £500 to £25,000. Start-Up Loans can be repaid over 1 to 5 years, with no application or early repayment fees.
To qualify, you need to:
- Live in the UK
- Be 18 or over
- Have or are planning to begin a UK-based business that has been fully trading for less than two years.
Grants for Women-Owned Businesses
Alternatively, female entrepreneurs can apply for a grant. There are various small business grants available to women, and many don’t have to be repaid, including:
- The Women in Innovation grant offers £50,000 funding to game-changing businesswomen who have been operating their business for at least one year.
- The Global Fund for Women provides grants to entrepreneurs who seek to advance gender equality. It can be used to cover start-up costs and expenses.
- Cartier Women’s Initiative is for early-stage businesses with a female leader, an original concept and high potential. 21 successful applicants will win grants of between £24,000 and £80,000.
- Back Her Business was launched by Natwest to help women entrepreneurs start their businesses. It gives applicants a crowdfunding platform to raise funds. To apply, the company needs to be female-led, UK based and have a target of £1,000 for the crowdfunding project.
- The Female Founders Fund aims to invest in women-owned businesses that are influencing the e-commerce sector. However, do note that an equity stake will have to be made for it.
What Are the Benefits of Business Loans for Women?
Female business owners can enjoy various benefits associated with business loans, including the following:
- You can quickly access funds as a merchant cash advance and some loans can be arranged within a day.
- A stable cash flow as you will have readily available money which can be managed by you.
- Monthly repayments are often fixed so you can organise and plan for the future clearer.
- You’re in control, so you can enjoy more financial freedom without relying on someone else.
Can I Get a Business Loan for Women If I Have a Bad Credit Score?
Poor credit history can be a cause for concern when it comes to loan applications of any kind.
If you do have a bad credit score, you can still access business finance, but you may face higher interest rates as you are deemed more of a risk. You may not be able to borrow large amounts of money for the same reason.
Similarly, you will likely need to provide a personal guarantee or security. Therefore, you may choose to avoid a small business loan where creditworthiness is a priority.
While a bad credit score isn’t the end of the world, you may find you are faced with high rates of interest, the need to provide collateral, and only being able to borrow smaller sums. Either way, be sure to check your credit score before submitting your application, as you may not be eligible from the outset.
Leading Networks for Female Business Owners
Surrounding yourself with people who have a similar goal can be motivational when setting out on a business endeavour. There are plenty of platforms where you can connect, ask questions, seek advice, and discuss topics with fellow women business owners. Here are just some:
British Association of Women Entrepreneurs (BAWE)
UK based BAWE is a non-profit organisation that seeks to empower female entrepreneurs.
The Female Entrepreneur Association
The Female Entrepreneur Association offers an online hub where women can make the most of useful resources such as content and opportunities.
Women Entrepreneurs UK
Women Entrepreneurs UK allows women to share their stories, including the ups and downs, to inspire and encourage fellow businesswomen.
Enterprising Women
Enterprising Women is a platform where women can uplift one another by training, connecting, and supporting each other.
Mumpreneur UK
Mumpreneur is a UK platform that caters to mothers running their own businesses. It aims to support, advise and encourage them.
Forward Ladies
Forward Ladies is a worldwide platform where women business owners can support and expose each other to opportunities.
Prowess
Prowess provides valuable guides and resources for women running businesses. It covers topics from money management to marketing.
The Importance of Business Loans for Women
Business loans for women can be incredibly helpful in elevating and boosting small and new businesses. The scales are still not balanced, however, as there are fewer women fronted businesses compared to men. This means the odds are somewhat stacked against women entrepreneurs.
Business finance can help get the companies off the ground and turned into well-established companies. That being said, you should always research thoroughly and be realistic about what you set to achieve and what type of loan you are comfortable with.
Who Offers Business Loans for Women?
There are various places you can access loans for women, including independent and specialist online lenders, as well as high street banks. The best business loans for you depend on your company and how much funding you need.
Final Thoughts
There are many different business finance options for women to consider, but the best will come down to your goals, how long you want the finance for, how you will use it, and how business-savvy you are.
We hope that this guide has given you some direction and has been helpful in your research for finding small business loans.
FAQs
How much funding can I get with a business loan for women?
This may be influenced by different factors such as your creditworthiness and lender. However, you can generally find lenders offer funding of between £1,000 and £500,000.
How soon will I receive my funds?
This will vary depending on your lender and how complex your circumstances are. It can take anywhere from a few days up to around six months. Online lenders are generally faster than banks, making them suitable when you need to boost your cash flow in a hurry.
How does a business loan for women differ from regular business loans?
Loans for women are designed to assist the running and growth of female-led businesses. It can encompass various options, including secured and unsecured loans.