Business Loans For Women: Are They Available?

If you’re a woman who owns her own business you may be looking to secure funding for your business. Read on to find out what options are available.

Rhiannon Philps Published on 23 June 2022.
Business Loans For Women: Are They Available?

Even though there are no specific business loans solely for women, there are plenty of commercial finance options available that women could consider. These could be used to buy equipment and stock, expand your business, pay for renovations, and cover any temporary cash flow gaps, for example.

You may also be eligible for a small business grant, including some schemes for business owners that are just open to women. These are designed to help women take the next step in their business journey, particularly as women are still under-represented in the business world.

The Gender Index Report 2022, which carried out research into women entrepreneurship, found that just 16.8% of active UK companies are led by women.

Despite this low figure, the Rose Review Progress Report found that 20% of newly formed companies in 2021 were led by women, an increase from 16% in 2018. This figure is still relatively small, but it seems to indicate that the representation of women in business is slowly improving.

There are also signs that businesses with a woman at the helm may not be accessing the same level of finance as businesses led by men. The Gender Index Report showed that only 11.9% of recorded investments went to companies led by women, with the majority of this funding coming from angel investors.

However, there are many other sources of business finance that women could consider, including business loans.

Find out more about your lending options as a woman in business.

Types of business loan

Business owners in need of funding have several types of business loans that they could consider. Each type of loan works slightly differently and is designed for different purposes, so it’s worth researching all your options before applying.

Unsecured business loan

These are a standard type of business loan that you can get from high street banks and online lenders, without needing to use an asset as security.

With an unsecured business loan, your business would receive a lump sum of cash which it would repay in instalments, with interest, over an agreed term.

Your finances and business credit rating are some of the factors that lenders look at to make a decision on your loan application. They can also affect how much you are able to borrow and the interest rate you are charged.

You may be able to provide a personal guarantee with these loans. This is when you personally commit to repaying the loan if your business is unable to do so.

Secured business loan

Secured business loans require you to provide some form of asset as security for the loan. This could be your property (if you own the premises), valuable equipment or machinery, a vehicle, or another high-value asset.

If you don’t repay the loan, the lender is entitled to repossess the asset to get back the money you have borrowed.

Because lenders have this security, they will often be more prepared to lend larger sums of money or lend at lower interest rates than if the loan was unsecured. But these loans are riskier for the business owner as they could lose their asset if they can’t afford to make the repayments.

Lines of credit

A line of credit may be worth considering if your business needs funding but you’re not sure exactly how much you need.

With this form of finance, you receive a credit limit which is the maximum amount you can borrow. You can then borrow money as and when you need it and only pay interest on the amount you use.

Working capital loans

A working capital loan could be an option if your business needs short-term funding, to cover a temporary drop in cash flow, for example.

Businesses that experience fluctuations in their income – for example, seasonal companies such as a landscape gardener or fireworks supplier – may need a loan to tide them over until trading picks up again. A working capital loan could help with this, but you need to be sure that you will be in a position to repay the loan in full and on time.

Invoice finance

Invoice financing allows you to access a loan secured against the value of an unpaid invoice.

Lenders could lend you up to a certain percentage of the value of an invoice. This means you wouldn’t need to wait for the customer to pay an invoice so you could access the cash sooner.

Merchant cash advance

A merchant cash advance, also known as a business cash advance, is designed for businesses that get a lot of their income from card transactions.

Businesses may be able to borrow a sum of money from the lender, which they would then repay through their card terminal. Every time they receive a card payment, a percentage will be deducted from it to repay the loan. This means the loan repayments are not fixed, but will depend on the amount of card transactions you have.

Start Up Loan

If you’re just starting out in business, you may want to consider taking out a Start Up Loan.

This is a government-backed loan scheme that offers loans from £500 to £25,000 to businesses that have been trading for less than two years. The loans come with a fixed interest rate of 6% per year and repayment terms of between one and five years.

Successful businesses can also receive some free mentoring and support to help them get started on their journey.

Business grants for women

There are some business grants and award schemes that are specifically designed for women who are leading the way as entrepreneurs, such as the Women in Innovation Awards and the Female Founders Fund.

These types of schemes can open and close relatively quickly, so it’s always worth checking at regular intervals to see if you’re eligible for any kind of support.

As well as schemes specifically for women in business, there are also a wide range of other grant schemes that your company may qualify for. These grants will have different eligibility criteria and may be designed for businesses in particular industries or regions, so it’s worth seeing what’s available to your business.

» MORE: Business grants for women

Other support for women in business

Monetary support isn’t the only kind of support that women in business can access.

There are business networks and organisations that are designed to give entrepreneurs opportunities to share their experiences with other women and support each other. For example, they may offer workshops, mentoring, training, conferences, and online resources to help women develop their business skills.

Organisations that can offer this kind of support to women in business include:

  • British Association of Women Entrepreneurs (BAWE)
  • Female Entrepreneur Association
  • Women Entrepreneurs UK
  • Enterprising Women
  • Certain high street banks, such as Barclays and NatWest

Applying for a business loan

If you decide that a business loan is the right option for you, make sure you have considered all the different types of finance so you choose the one that best meets your requirements.

When you apply for a business loan, you will need to provide the lender with several pieces of information, including:

  • your business name and address
  • your business trading history
  • information about your business finances and turnover
  • what you need the loan for
  • how long you need the loan
  • how much you want to borrow

Lenders will then review this information and run a credit check on your business to decide whether to offer you a loan and, if so, at what terms.

» COMPARE: Business loans

Image source: Getty Images

About the author:

Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more

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