How Women-Owned Businesses Can Overcome the Investment Gap and Access Financing

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Running a business is hard work no matter how you slice it, and if you need to secure outside capital to start or grow your business, it’s even harder — especially for women.

It’s a sad fact, but in addition to the gender wage gap, there’s also a gender investment gap. This means women-owned businesses don’t receive as much capital or financing as male-owned businesses. There are many theories as to why: Some experts think it’s due to male investors not taking female business owners as seriously, or not understanding a business if it’s geared toward women consumers.

It’s also theorized that women don’t ask for as much as men and might not push back as much when they’re funding goals aren’t met. Or, they don’t ask for as much to begin with. A report by the Women’s Business Enterprise National Council (WBENC) found that 25 percent of female business owners were likely to seek financing, compared to 34 percent of male business owners. It also found that women used credit cards more frequently for financing, while men relied more on equity investing.

On the bright side, female business owners are resourceful and successful. According to research by Boston Consulting Group (BCG), women-owned startups achieve higher returns (twice per dollar compared to male-owned businesses) and generated 10% more revenue in a five-year period.

Women-owned Businesses Are Growing — Fast

One thing is undeniable: Despite the funding gap challenges, women-owned businesses are booming. A 2018 American Express report found that they surged 58 percent between 2007 and 2018, compared to general business, which increased by just 12 percent. Additionally, the WBENC report found that between 2007 and 2018, businesses owned by women of color surged a whopping 163 percent.

When it comes to industries, half of all women-owned businesses fall into three dominant sectors. The most common, according to the American Express report, is what they deem “other services.” This includes things like nail salons and pet care businesses and accounts for 23 percent of women-owned businesses. The next most common, coming it at 15 percent, is health care and social assistance, which includes home health care and childcare. The third most popular industry is “professional/scientific/technical services,” which American Express defines as professions such as bookkeepers, lawyers, architectures, publicists and consultants.

7 Ways to Fund Your Business

If you need funds to help acquire the business of your dreams, get your own business off the ground or grow your enterprise, you might feel a little overwhelmed. There’s a dizzying number of financing options, each with differing requirements and pros and cons. Here’s what you need to know about some of your best funding options, some of which are geared specifically toward women.


Tailored Funding Options for You


1. Grants for Women

Grants are essentially gifted funds that you don’t have to pay back, and they often require applications that are judged based on need and/or merit. There are many federal grants out there, and while there are exceptions, they often aren’t geared toward small businesses or women-owned businesses. Fortunately, there are many private grants focused on providing funding to female business owners.

Here are just a few of the grants available to women-owned businesses, and you can find dozens more at grantsforwomen.org:

  • One is the Amber Grant, which gives out $2,000 to several women business owners, and then an extra $25,000 to one of them, annually. Any type of industry and need is welcome, but it cannot be a nonprofit.
  • The Girlboss Foundation gives out a semi-annual grant of $15,000 to “female entrepreneurs pursuing creative endeavors.” Your business must be established and in the field of design, fashion, art or music.
  • Cartier’s Women’s Initiative provides grants of $100,000 and $30,000 for female-led, for-profit, early-stage businesses.

2. Female-focused Venture Capital Firms

Another way to fund your business is to obtain funding from a venture capital firm or angel investing group. These organizations fund early-stage businesses in exchange for a stake in the business. While venture capital has traditionally been a very male-dominated space, several new firms have popped up that focus on supporting women. Here are a few:

  • Backstage Capital focuses on small business owners who are women, LGBTQ+, and/or people of color.
  • Black Girl Ventures specializes in supporting black or brown woman-identifying business founders.
  • BELLE Capital USA is an angel investing group for businesses that have a female founder or executive or are willing to bring on a female executive or member of the board of directors.

3. Business loans

A business loan gives you a lump sum of cash that you repay over time, typically at a fixed interest rate. There are numerous business loans available, one of the most common being an SBA loan, which is guaranteed by the government but offered by private lenders. They offer competitive rates, but they can be difficult to qualify for and often require tons of paperwork and documentation.

Another option is a private small business loan that you can obtain through a traditional bank or credit union, or through one of the numerous online-only lenders. Be aware that most lenders do require a minimum income or time in business as part of the eligibility criteria, so a business loan is not ideal for a brand-new business.

4. Personal loans

If your business isn’t yet established enough to qualify you for a small business loan, another option is to apply for a personal loan. Your credit will be checked, but you aren’t required to have a certain business revenue or time in business to qualify. In most cases, a personal loan can be used however you’d like, so you can apply it to your business however you see fit.

5. Business credit cards

Business credit cards are another way to fund business expenses, and they can offer more flexibility than loans. That’s because you’re not getting a lump sum that you repay once; you’re getting a line of credit that you can use as much as you want up to the credit limit (though going too high can ding your credit score). Then as you repay it, you have access to that capital again.

However, a card’s credit limit may not be high enough for major purchases, and credit card interest rates are often higher than loan interest rates, so carrying a balance can be expensive. If you’re not able to qualify for a business card, you could use a personal credit card, but just keep in mind the impact it can have on your credit score.

6. Business line of credit

You could also consider opening a business line of credit. The concept is similar to a credit card; rather than receiving a lump sum like a loan, you get a credit line and only borrow what you need. You only pay interest on what you use, and as you repay it, you can reborrow up until the end of your term. Lines of credit typically provide higher credit limits than credit cards, and they can be either secured or unsecured.

7. Other options

There are other ways to fund a business, such as merchant cash advance, inventory financing and invoice financing/factoring, but these can be costly options. They should only be used if you aren’t able to secure any traditional funding.

We know it can feel overwhelming trying to find the best way to finance your small business. But know that there are many options for businesses of all different stages, and there are grants and an increasing number of investors that support women-owned businesses.

2020 Women in Business Trends Report

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