Finding Capital for Women-Owned Businesses Is a Challenge

Gaining access to money is difficult for female entrepreneurs.

For Women's History Month and International Women's Day, Experian took a deeper look at the unique issues that women company owners face when obtaining financing for their operations.

The time is of the essence when small firms want cash. Their needs may include the replacement of damaged equipment or the provision of resources to introduce new products. Because of the financial crisis and a wave of bank regulation, many major financial institutions are reluctant to provide speedy loans, particularly when the amounts asked are lower than those demanded by bigger corporations. Most female entrepreneurs resort to internet lenders, where they may have to pay a greater interest rate than they would otherwise pay. It is common for loan repayment terms to be less than one year, which might damage a small company owner who is just starting started.

Creating a Business for Women Entrepreneurs

Before the end of this month, the National Women's Business Council published a paper titled Understanding The Landscape: Access to Capital for Women Entrepreneurs. As the survey points out, female entrepreneurs face significant financial obstacles.

Compared to males, women raise lower sums of money and depend more on their own sources of income.

Generally speaking, women are considered "less trustworthy" and more "illegitimate."

Women investors prefer to collaborate with males who own and operate their own companies.

After the early launching period, these inequalities remain.

Dana Donofree, a female entrepreneur, presented her story of attempting to get finance for her lingerie business for female consumers. Female breast cancer patients and breast cancer survivors come to her for advice and assistance. Using just her own funds, Donofree started AnaOno Intimates from the ground up. My firm was launched without the assistance of a loan or borrowing money. As Donofree said, he began cautiously and expanded as much as possible. As a result, I began looking for loans when they needed to grow outgrew my ability to fund them with cash on hand.

The Moment It Is Appropriate to Scale

When compared to the findings of the NWBC study, Donofree's experience was consistent. She met opposition when she attempted to grow her business, even though credit cards and personal money were used to begin it. As a first step, she went to her bank, with whom she had a long-standing personal and professional connection. The bank refused to provide her extra credit even though she had a good credit history with them and had even paid "more than the required minimum payments."

Then I went to alternative finance, which included non-profit organizations that assist small socially-oriented enterprises in scaling up and other lenders like OnDeck, who authorized me for loan funds that I required to develop my firm but at a higher interest rate than my bank loans.

In light of the Small Company Administration's recent report, which states that access to small business loans is dwindling, more women entrepreneurs are turning to online banks to help them build their companies. Online bank loans have become a popular choice, but interest rates may range from 9 per cent for more established firms to 99 per cent if your credit is ordinary or bad or if your company is less than a year old, depending on your credit score.

Another alternative investigated by Donofree was the e-commerce platform Shopify, which offers loans depending on sales volume and PayPal as a finance source. "These loans are fantastic because they take a portion of your sales before your money reaches the bank, so you are constantly paying it down depending on your incoming cash flow," Donofree says. In comparison to a fixed monthly payment, it was a wonderful alternative.

Women Entrepreneurs Have a Variety of Funding Options

Women entrepreneurs benefit more from easily accessible alternative finance choices than conventional banks, and they are eager to experiment with innovative alternatives.

According to the NWBC survey, women are more eager than males to engage with their networks to raise funds via crowdfunding, and they have a higher rate of success. Women have learned to raise finance despite gender prejudice by relying on inherent emotional ties with their network, establishing brand trust, and persuading people who contribute, among other strategies.

A CDFI is a financial institution supported by the United States Treasury Department and that serves a similar function to that of a bank. Access to investment capital for underprivileged areas and the leaders who help them expand their enterprises is encouraged by a CDFI.

Specific funding that supports women's and minority-owned enterprises may also be accessed by anyone seeking assistance. The National Women's Business Council has compiled a list of growth and financing choices on its website to promote more women-led enterprises and their development.

Leaders might be inspired to establish or build their enterprises with the guidance of mentors and other female role models. According to the Small Company Association, small business owners with access to mentorship have greater growth rates and revenue. An entrepreneur who is just starting may find it helpful to hear something encouraging from someone who has already been there and done it.

Donofree thinks that women should stand by one another in times of need. In addition to believing that women should feel powerful and attractive, "I am quite enthusiastic about how to establish your own company, particularly as a woman," says the author.