What Women-Owned Business Owners Should Know About Funding

Though March is ending and we’re barreling into April—and tax season—it’s useful to look back at Women’s History Month and the ongoing challenges and opportunities for women-owned business leaders all year long. This Diversity Month, we ask how female entrepreneurs can equip themselves for funding success at any point in their journey?

Woman business owner looks at computer in her empty restaurant before workday begins.

In the United States, women-owned businesses (WOBs) represent 42% of all SMEs (small business). Female entrepreneurs are growing their sectors more than twice the rate of their counterparts and are three percent more likely to start a business than males, employing over 13 million workers last year. Annually, women-owned businesses report $1.9 trillion in revenues.

Despite this wave of success, 62% of female entrepreneurs report experiencing some form of gender bias during the funding process—whether it was being denied a loan or paying higher rates than male borrowers.

The numbers support the claims. In recent years, the average loan size for women-owned business owners is 31% less than other borrowers. Over and over again, VC or investment firms dismiss female entrepreneurs as a “risky investment”due to the startling and historical biases plaguing women and finance.

Moreover, most research about this impact focuses explicitly on non-inclusive gender: men versus women. Transgender and non-binary people continue to be excluded from the data altogether, suggesting the U.S. financial insights portray a slim and incomplete story.

Despite these hurdles, how do women (and womxn)-business owners equip themselves for a more positive financial future?

Here are three tips:

Do your research

Because many barriers have existed and continue to exist for women securing loans, the U.S. Small Business Administration (SBA) prioritizes female business owners. More than half of the SBA’s microloan program—57%—went to female applicants last year. Maybe you didn’t know that a microloan was available to you? First, visit your local CDFI and Women’s Business Centers for resources, tools or guidance—whether it’s assistance with your business plan or counsel on the type of loans or grants available to you. The SBA has a local locator tool that can help you determine the nearest Women’s Business Center or CDFI so you can work with someone who understands the regional market and state laws.

In addition, female entrepreneurs ought to certify as a WOSB (Women-Owned Small Business) through the Small Business Administration as possible. The three major requirements for the program are:

  • Meet small business requirements according to SBA size standards
  • Be at least 51% owned and controlled by women who are U.S. citizens
  • Day-to-day management of operations must be performed by women who also make the long-term decisions for the company.

After certifying as a WOSB, female owners are eligible to compete in contracts specifically set aside for underrepresented businesses. In 2022, this contributed to an additional 5% of contracts set apart from the market-at-large.

Two women look at computer to source loan data.
Photographer: KOBU Agency | Source: Unsplash

Explore funding options from trusted, online lenders

The good news for underserved borrowers—and particularly women—when it comes to FinTech? Funding is largely objective, based on numbers and analytics, and your application won’t be biased—even implicitly—by your gender, appearance, race, age or any other potentially discriminatory factor. Your numbers will speak for themselves.

In the same way you want to do good business with honest people in real life, it’s important for any borrower to vet their online providers. In this case, the goal is to avoid predatory lenders. The rule of life prevails here: If something seems too good to be true, it probably is.

Increasingly, though, it’s possible for underrepresented borrowers to learn about a company’s mission through online platforms or endorsements. Does the company share a message you stand up as a female entrepreneur? Do you share similar goals? Does your lender share a vision that’s inclusive of the broader community.

Woman in meeting with two other women.
Photographer: Tim Gouw | Source: Unsplash

Know your worth

Bankers speak ROI. The savviest women-business owners know their business plan in-and-out, and can speak to their market position with researched data, facts, and projections. If a female business owner and borrower knows they may be perceived as a “risky investment,” they counteract discrimination with information.

If you need help or additional resources in developing a business plan, dreambuilder.org provides free assistance, online demos and more. Private grant opportunities are also available through incubators and charitable arms of large banks or corporations. Grantsforwomen.org can help underserved entrepreneurs locate and learn the terms to apply for additional funds. In some cases, these programs provide access to grant capital or additional resources, such as marketing help aimed specifically for women-owned business. Similarly, Loan Mantra shares ample resources and our friendly staff of experts is available to guide you through financial options or help you onboard FinTech to originate and source loans. We can also securely store important financial documents until you’re ready to apply for a loan or grant.

Need some help? Here’s a few other statistics to share your case:

  • Women outperform men by 8% when it comes to crowdfunding.
  • Private tech companies led by women achieve 35% higher ROI than their counterparts.
  • Women start approximately 1800 business/day.
  • Of the businesses started today, 63% were founded by women of color
Woman business owner on phone with smile.
Photographer: Paul White | Source: Unsplash

Though we leave Women’s History Month behind, Loan Mantra acknowledges the significance of women-owned businesses every day of the year.