5 Financing Tips for Women Small Business Owners

Women-owned businesses are the fastest-growing segment of entrepreneurs in the United States and account for roughly 40% of small businesses. While women-owned businesses share many of the same challenges as most other small businesses, they often have a harder time getting a small business loan. According to a recent study from the New York Federal Reserve, 64% reported a funding gap.

Even when they do get a loan, they still tend to struggle to get the full amount of financing they’re looking for—the average size of a loan for women-owned businesses is 31% less than for men-owned businesses.

With that in mind, here are 5 tips to help women business owners better prepare for the financing application process and get the funds they need.

1. Avoid Using Personal Credit to Pay for Business Expenses

While it’s tempting for young companies to use personal credit to get off the ground, it’s important to start building your business credit profile by using business credit whenever possible. A recent study from Experian found that women business owners are more likely to use their personal credit and less likely to seek out commercial credit. This practice makes it more difficult to get larger business loans down the line, as you don’t build your business credit profile. One way to start building business credit early is to talk to your suppliers to see if they offer credit to their customers. Additionally, apply for a business credit card and use that for all business expenses rather than personal cards.

2. Ask Your Suppliers If They Offer Payment Terms

Trade credit is one of the most efficient ways to build a strong business credit profile. Most suppliers will offer 30-, 60-, or 90-day terms to their best customers, so don’t be afraid to negotiate. However, make sure your supplier reports your on-time payments to the business credit bureaus. If they don’t, you might be building good credit with that particular vendor, but you’re not doing anything to build a strong overall business credit profile.

3. Don’t Be Afraid to Look Outside the Bank

The first place most business owners (including women) look for a loan is the bank where they have their other business accounts. Unfortunately, unless you’ve been in business for a few years, have a strong personal credit score, and need a larger loan, the bank likely won’t be very motivated to work with you. If your business is newer, you might consider crowdfunding or nonprofit lenders who often offer low- or even no-interest microloans.

4. Learn More about Business Credit

To improve your business credit profile, you should first know what your profile looks like and how it is compiled. If you don’t know much about business credit, you’re not alone—the same is true for most business owners.

The 3 major business credit-reporting bureaus are Experian, Equifax, and Dun & Bradstreet. If you haven’t already, you should review your profile to make sure the information in it is accurate. Additionally, make sure to do a regular review of your business credit profile to check for mistakes, as these can hamper your ability to get a small business loan.

5. Network with Other Women Business Owners

Networking at local Chamber of Commerce events or other business networking groups can be a great way to gather tips from other business owners on financing. In particular, a number of networking groups focus on women business owners and the unique financing challenges they face.

For example, the SBA has a network of business centers across the country to help women business owners. The National Association of Women Business Owners is another great networking group.

Both women and men business owners struggle with many of the same issues when looking for financing. Although the practices outlined above might not get you a $100,000 loan from the bank today, they will help you create a stronger credit profile, build relationships with people who can help you, and improve your odds of success down the road.