A Guide to Federal Small Business Loans for Women

A Guide to Federal Small Business Loans for Women

by Kylie Ora Lobell, September 2017

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Women-owned businesses are an important part of the United States economy. According to an American Express OPEN study, in 2016, there were 11.3 million women-owned companies in the U.S. that employed nearly nine million people and generated more than $1.6 trillion in revenue.

Even in the aftermath of the recession, the growth of women-owned businesses surged. Between 2007 and 2016, the number of women-led companies increased by 45 percent, compared to a nine percent increase among all types of businesses. Now, women are majority owners of 38 percent of businesses in the U.S.

If you are a woman and thinking of opening your own business, or you have been in operation for a few years and want to expand, now is the time to do it. You may qualify to receive federal funding for your endeavors and get started with low-interest loans.

The following are some options for federal small business loans for women, as well as how you can apply for them.

SBA 7(a) Loan

All small business owners can apply for the Small Business Administration's SBA 7(a) loan. As of March 2017, 32 percent of all SBA 7(a) loans were allocated to businesses owned by women. The SBA loan amounts range from $30,000 to $5,000,000, and annual gross revenue requirements are at least $120,000. You must have a credit score of 680 or above and be in business for at least two years before applying.

Typically, you will receive funding within 30 to 90 days at a variable interest rate ranging from 6% to 9.5 %. The payback period is 10 to 25 years. Unlike private lender requirements, you can qualify for a loan even if you don't own property. To apply for the SBA 7(a) loan, visit the SBA's 7(a) loan website.

United States Department of Agriculture Loan

If you are a female farmer or rancher, the USDA can provide you with funding for your operations. There is the Direct Farm Ownership Down Payment Loan, which requires applicants to provide five percent of the purchase price of the land. Another loan is the Direct Farm Ownership Joint Financing Loan, which offers up to 50 percent of the cost or value of the property being purchased.

There is also a “regular" loan to help with the running of the farm and a Direct Farm Ownership Microloan for smaller and more niche operations. While the microloan maximum is $50,000 and needs to be paid within 25 years, some of the other farming loans go up to $1.4 million and do not need to be paid for up to 40 years. Interest rates vary from 1.5 to 3.75 percent. To apply for a farming loan, visit the USDA website.

Community Development Financial Institutions

Community Development Financial Institutions (CDFIs), which are part of the Federal Reserve, are for businesses that may have had trouble receiving funding from traditional lenders. The CDFI approval rate for businesses making less than $1 million per year was more than 75 percent, according to NerdWallet and a study from the Federal Reserve. The interest rate on a CDFI loan may be lower than that of one from the SBA, and the loans are fixed rate. To qualify for the loan, you must pledge to cater to an underserved community and encourage economic development. If you want to apply for a CDFI loan, first start by identifying the CDFIs in your state.

Training and Support for Women in Business

If you need help navigating the loan process, you can become involved with the Association of Women's Business Centers or the National Women's Business Council, both of which provide training and support for female entrepreneurs. You can connect with other women-owned businesses, as well as receive mentoring from successful women business owners.

Seeking a Grant Instead?

If you would rather apply for grants, which you don't have to pay back, there are a number of grants available as well. Look at Grants.gov for options to apply for a federal grant.

If your small business is engaged in scientific research and development, you may qualify for grants through the Small Business Innovation Research (SBIR) Program. With federal grants, you may be able to garner thousands of dollars to build the woman-owned business of your dreams.

More Resources

While both federal loans and grants may be viable sources of funding for your women-owned business, be sure also to explore valuable business and financial information that's available from resources as diverse as the U.S. Small Business Administration and your local public library—much of which advice is free or low cost to you.