August 26, 2020

Business Loans for Women—What to Prepare & How to Apply

The number of female-owned businesses is on the rise. In fact, according to an analysis of 1.4 million small businesses, there was a 31 per cent surge in companies with women at the helm in 2019 (male-led companies rose by 21 per cent).

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Research shows that women tend to be more reliable when borrowing money and have a lower insolvency rate. According to insolvency practitioners KSA Group Limited, insolvency rate is 70 per cent higher in male run companies.

Yet despite the changing landscape, only 19 per cent of SMEs in the UK are led by women today. Also, 2019’s UK Treasury report found that female entrepreneurs get 157 times less business funding than their male counterparts.

At Funding Options, we’re confident that these figures will improve over time, as long as funding is made available to female-led business and inclusivity remains a priority. 

If you run a business and require funding for growth or cash flow, you can use our platform to see what you could be eligible for based on your needs and circumstances. In the meantime, let’s take a look at some of the finer details. 

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What are the benefits of business loans for women?

As well as breaking down barriers and encouraging more women to start businesses, there are lots of benefits when it comes to funding businesses owned by women. The rise in alternative finance lenders means there are a variety of options out there to match different needs. The right business loan can:

 

  • Help businesses overcome cash flow challenges
  • Accelerate business growth
  • Access funding quickly
  • Get short-term finance

If your business has been negatively impacted by the Covid-19 pandemic, you may be eligible for the Government’s Coronavirus Business Interruption Loan Scheme (CBILS) or the Bounce Back Loan Scheme (BBLS). You can visit our Coronavirus Funding Hub to find out more and you can apply for the CBILS through Funding Options.

 

Small business loans for women with bad credit

Having a low credit rating can hinder your ability to get a business loan, especially from traditional lenders such as  banks. Fortunately, there are many options on the market today and it’s possible to get a business loan with bad credit.

There are also grants and government initiatives to help female-led businesses survive and prosper. If you think about it, keeping a business trading benefits the wider UK economy, so help and information is readily available via sources like the Business Debtline

While it may be possible to find funding alternatives if your business has bad credit, it’s a good idea to work on improving your rating first. Start by finding out what your business’ rating is and work out what you can do to improve it.

Our article on improving your credit score delves into five ways you can take action, including establishing credit and monitoring your credit utilisation ratio. It's also useful to remember that credit ratings and scores are just one of the things lenders assess when building a picture of your business.

 

Small business loans for minority women

As well as business loans, there are funding opportunities out there for ethnic minority entrepreneurs, including grants. Start Up Loans, for example, were introduced to tackle inequality in society by ensuring that people from all backgrounds can access the money they need to start a business.

Recent data from the Government-backed programme indicates that the initiative has issued 7,366 loans to start-up owners in London from BAME backgrounds since 2012, adding up to over £50 million in funding. 

 

“While two in five (40%) Londoners identified as being from Asian, Black, Mixed or Other ethnic groups in the last census, almost half (48%) of all the 15,423 Start Up Loans issued in the capital since 2012 went to people from BAME backgrounds.” - Start Up Loans

 

Small business loan types

There are dozens of business loan solutions out there and they typically fall into two categories: secured and unsecured loans. Secured loans require security in the form of assets such as commercial property, machinery, stock and vehicles. Unsecured loans will usually require a personal guarantee, meaning if your business is unable to make a loan repayment, you’ll pay instead. 

Depending on your needs, you may want to explore any of the following funding solutions:

 

  • Small business loans
  • Credit cards
  • Overdrafts and alternatives
  • Invoice finance
  • Asset finance and refinancing 
  • Bridging loans

 

Small business loan eligibility criteria

Eligibility criteria for businesses loans vary from lender to lender and the amount you’ll be able to borrow will depend on a number of factors, including turnover and credit score. It helps to be prepared, so we’d recommending having the relevant information to hand:

 

  • Turnover and profit
  • Bank statements
  • Filed accounts
  • Loan amount vs. turnover
  • Trading history
  • Payment history (e.g. CCJs, late payments)

 

There is no single set of criteria for business loans either, however there are a few general rules to keep in mind before you apply for a business loan.

 

  • The loan amount is under 25% of your annual turnover
  • Your business is profitable
  • You have more than 24 months trading history (for most solutions)
  • No outstanding CCJs or late payments
  • Your business is based in the UK

 

Where can I apply for a business loan?

Funding Options helps UK firms access business finance and find the best financial products on the market. Simply tell us how much you need to borrow and what it’s for and we’ll match your requirements with 70+ providers before helping you apply to the lenders you choose.

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