Last year, the number of women-owned businesses on the Fortune 500 reached a record high of 41 businesses. While there is still plenty of room to grow, this increase in female entrepreneurship has inspired others to launch their small businesses and realize their dream of being their own boss.
Women in business face so many challenges that their male counterparts do not, including wage gaps, lack of support, fewer assets, lack of representation in c-suite positions, the list goes on and on. One of the most overlooked obstacles female business owners face is unequal access to growth funding. All companies need growth capital to support them with the initial launch and for expanding operations. However, female business owners have not had the same access to traditional loan opportunities, making it much less likely that their business will survive.
According to Biz2credit, the average loan size for women-owned businesses ($36,981) was 33% lower than for men-owned businesses ($55,061) in 2020. Furthermore, looking at PPP loans alone, the average approved amount for women-owned businesses ($41,304) was 47% less than men-owned businesses ($78,229). These disparities in loan amounts are clear indicators of an unlevel playing field and disadvantaged access to growth capital.
What is the solution to fill these gaps and encourage female entrepreneurs to grow their businesses? Microloans.
The benefits of microloans
As the name suggests, microloans are smaller-sized loans that typically range from $500 to $50,000. For new small businesses, a microloan can be a great way to get up and running as you build the foundation of your business. Microloans are a great way to help cover initial startup costs until you can establish enough credibility to apply for larger forms of funding down the line.
For established businesses, these smaller loan amounts can help for periods when you are struggling to break even. If your company is doing well, but you are having a hard time affording raises for your employees, a microloan is a great way to cover other expenses that can be translated into a direct return on investment, such as advertising and marketing. To put it simply, a microloan allows you the freedom to use your current revenue to improve your staff’s wages and benefits, while you use that small amount of borrowed money to reach new customers and grow your future revenues.
How microloans impact women-owned businesses
According to Biz2credit, 31% of women-owned businesses are categorized as a service, and 15% are retail. These industries require significant back stock, equipment, shipping costs and storage space. Fortunately, even if traditional lending options or investor funding falls short, microloans are becoming more available for women seeking to start or expand their own small businesses.
Additionally, microlenders offer a simple and affordable way for women-owned businesses to secure competitive rates on loans so they can give their small businesses the funding it needs. Not only is this a smart option to obtain business funding, but these loan programs also provide mentoring and business resources to support business growth and development.
Obtaining the best microloan for your business
Microloan application requirements are not nearly as strict compared to traditional business loans. For business owners who have not been operating for long or who have a shaky credit history, microloans can be a great option. Additionally, it is designed to get you your money quickly. Typically, you can get approved and funded in one or two weeks, which can save you from having to operate underfunded for multiple months.
The goal behind microloans is providing qualified small businesses with fair, accessible funding, as well as training and educating business owners. Existing businesses should also take advantage of microloans to give a financial boost to grow and expand current operations. Always do your research about the company you’re looking to borrow from. Certain programs have restrictions on how you use your funds, so it’s important to review how you plan to spend the funds with your lender to ensure you’re compliant.
Microloans are leveling the playing field
While we’ve made great progress toward equality, there is still a lot of work to be done. Fortunately, even if traditional lenders fail to help, you still have options. Microloans help level the funding playing field for traditionally disadvantaged business owners, such as women, veterans, or minorities.
To explore whether a microloan may be the right funding choice for your small business, visit businesswarrior.com.
Rhett Doolittle is the CEO and Chairman of Business Warrior. Business Warrior is an open source technology company providing small businesses in the United States with a suite of data driven marketing and next-generation funding solutions to boost local market dominance. Founded in 2014, Business Warrior is singularly focused on offering locally-targeted lead generation marketing and funding solutions that fuel small business growth. By using next generation machine-learning and native software, Business Warrior has made growth funding and conversion marketing accessible for thousands of under-resourced and under-funded small business owners. For more information, visit BusinessWarrior.com.or follow the company on twitter @BizWarriorLIFE.