How Women Are Running Their Own Businesses With Alternative Financing
While the growth of women run business is at an all-time high, women still face significant barriers in accessing traditional forms of financing in comparison with their male peers. Although women now own nearly a third of new businesses, they only receive about five percent of the total dollar amount of traditional business loans issued by brick and mortar banks. Over half of all college graduates are now women, and yet women still have on average, far less capital to invest in new businesses.
No wonder so many women are now turning their attention to alternative financing options to grow their businesses. With such a crucial, rapidly growing need, there are now more options than ever.
Microloans are typically offered by nonprofit organizations who cater specifically to high need groups such as women, minorities, veteran and disabled entrepreneurs. Many even require applicants to provide proof of low to moderate income levels. These groups actively seek out those who are most routinely denied by traditional financing organizations. Microloans are also offered in a smaller amount than is traditionally available, usually maxing out at $50,000. For many, this smaller dollar amount is an advantage, especially when first establishing a business. Often, larger loan amounts can be overkill.
Smaller alternative financing loan amounts can mean better repayment terms and lower interest rates. A smaller loan amount can provide just enough scaffolding to allow you to establish your business without overburdening you with large interest payments.
Business Lines of Credit
Opening up a business line of credit also subverts the need to finance an overly large amount of money. Not only will a well-managed business line of credit help you improve your business credit score, which can improve your future loan application prospects, it allows you to access capital on an as needed basis.
With a $50,000 loan, you will be paying interest and finance charges on the total amount whether you need every penny of that balance or not. With a $50,000 line of credit, the whole amount is available to you if necessary, so you have the security of an increased emergency working capital, combined with a substantial decrease in fees and interest payment.
Other Alternative Financing Options
Other, more recent alternatives such as crowdfunding and peer to peer lending, which connects individual donors and lenders with entrepreneurs stray even further from the traditional lending model. Many of these options function more like a grant, issuing funds that do not need to be repaid at all. Do not be afraid to think out of the box when it comes to financing your business.