An Overview of Small Business Loans for Women
Small business loans. They can be both a dream come true and a nightmare for the individual starting a business. When it comes to small business loans for women, the same is true. Loans that are properly used in relation to an effective business plan and adequate financial backing can help the female entrepreneur turn a great idea into a very successful business. However, loans used in conjunction with a poor business plan and inadequate funding can become a nightmare. It's important to note that small business loans are just a part of the overall equation for starting a business.
The Truth about Government Loans and Grants
Before we get into applying for small business loans, we must point out the reality of government funding. Unfortunately, you can do an Internet search on the phrase "small business loans for women" and see literally thousands of results linking to pages claiming the government gives away free money to female entrepreneurs. This leads many businesswomen to put their hopes in something that simply doesn't exist. It can be a very discouraging way to start a new business.
Understand right up front that the federal government cannot, by law, give business grants to anyone except under extremely rare circumstances. As far as the U.S. Small Business Administration (SBA) goes, they are also not in the business of giving grants or loaning money. They are an agency whose primary mission is to provide education and planning resources to entrepreneurs starting or running a small business. They do not give or loan money in any way, shape or form.
Where to Get Small Business Loans for Women
The position of the federal government leads us to ask, "Where can I find small business loans for women?" A good place to begin answering this question is by visiting the Small Business Administration and Office of Women's Business Ownership websites. Both sites are a wealth of information regarding everything you need to get your business started. They offer not only information about where to find loans, but also how to write a business plan, how to pitch your proposal to investors, and so forth.
If there are any local business support groups for women in your area they are also a wealth of information. Any place you can network with fellow female business owners is a place where you can ask questions and get leads. Remember, the more women business owners you can rub elbows with, the more help they will provide.
That said, most of your business loans will come from standard banks and private investors. When a bank offers a loan identified as an SBA loan, understand that the money comes directly from the bank. The bank's association with the SBA is only to the extent that the federal government offers a certain amount of guarantee to the bank should you default on your financing. But the bank is still taking the initial risk, and they are the ones who will approve or deny your loan application.
Multiple Sources of Funding
One of the things new entrepreneurs fail to understand is that business funding typically comes from multiple sources. It is very rare for the female business owner to be able to secure one loan from a bank and one loan only. And by the way, there are good reasons behind this.
Statistics show that it takes the typical small business in the United States about three years to begin turning a profit. The vast majority of new businesses in this country fail prior to that three-year period because business owners are ill-prepared to wait that long before the profits start rolling in. Knowing that, banks and other financiers are not willing to assume 100% risk for a new venture. Usually you'll get no more than 20% to 30% per investor.
If you're starting a new business, plan to apply with several banks, private equity investors, and business incubators. You may even want to approach family and friends who might be willing to invest a couple of thousand dollars in your venture. When all is said and done you may have a dozen or more sources of funding to get you going. Also keep in mind that you'll need commitments equaling 2 to 3 years worth of funding in place in order to maximize the chances that your business will succeed.
Pitching Your Proposal
The key to successfully pitching your business proposal to investors lies in your business plan. There is no concrete method for preparing a business plan, but there are some things that all investors are looking for. Those things include:
- mission statement and vision
- a thorough understanding of your industry and competitors
- the specific products or services you plan to provide
- an explanation of your chosen demographic
- a plan to reach your potential customers
- an overview of short, medium, and long range goals
- an explanation of why you believe your company will be competitive
If you need help preparing your business plan the SBA has resources available to help you. If your local school district offers a continuing education program, you might find a course designed to teach you how to write business plans. Finally, you could approach other local business owners who've been at it a while and ask their advice on the subject. One way or another there is enough help available that you should be able to get your business plan completed.
Be Persistent
The last thing you need to know about starting your business is to be persistent. In other words, you may make five applications for small business loans for women. Don't stop there. While you're waiting for the answer to those applications hunt down a couple of private equity investors. While you are pitching your proposal to them, seek out business incubators willing to give a listening ear.
In other words, your success throughout the entire life of your company is going to be based on your willingness to be persistent in pursuing your goals. If you're not willing to be persistent in securing your funding, you don't have much chance of your business succeeding anyway.
Small business loans for women are out there along with small business grants and plenty of other sources for funding. The sooner you get your business plan together, the sooner you'll be able to raise the funding necessary. Good luck in reaching your dreams!