This article discusses the following:
- Findings of Biz2Credits 2022 Women-Owned Business Report
- The unique challenges female entrepreneurs face
- Creating a business plan
- How to take advantage of resources available for female business owners
- Getting funding for your business
- The best lenders for your business loan
Biz2Credit’s annual report about women-owned businesses has just been released for 2022. Several significant findings can be gleaned from the report. We’ll review them shortly, but one thing is certain: Entrepreneurship for women is just as exciting as ever, with a promising future that will see more women taking on the challenge of owning their own business and making their mark in a free enterprise culture.
The number of women-owned businesses and startups continues to rise. According to the Women’s Business Enterprise National Council (WBENC), around 13 million businesses are owned by women in the U.S., representing a 42% share of business ownership.
Furthermore, the National Association of Women Business Owners (NAWBO) points out that one out of every five businesses with annual revenue of $1 million or more is owned by a woman.
While this still represents a gap between women-owned businesses and businesses owned by men, the gap is a little smaller each year.
One thing is certain: Women-owned businesses are taking the business world by storm. If you’re a woman who dreams of entrepreneurial success, there’s no better time than now to join in the momentum and be on your way to owning your own business or growing your current one.
Before discussing how you can make that happen, let’s dive into what the Biz2Credit women-owned business study can show you.
Key takeaways from the report
- The average annual revenue for women-owned businesses in 2021 was $475,707. This was a 4% decrease from 2020.
- Women-owned businesses took in nearly $200,000 less in annual revenue than male-owned businesses in 2021.
- Average earnings also decreased, from $119,654 in 2020 to $88,895 in 2021.
- Women’s average credit scores were slightly less in 2021 (580) compared to 2020 (588). On the other hand, men saw a bigger decrease, from 611 in 2020 to 594 in 2021.
- The average size of a business loan for women grew in 2021 compared to 2020, from $36,981 to $49,712. But the average loan size for female entrepreneurs in 2021 was 33% lower than loan sizes for male entrepreneurs ($83,198).
- The average length of time in business for women-owned businesses stood at 44 months in 2021.
- The majority of female business loan applications originated from Texas.
- Women (40%) were nearly as likely to receive funding for their business as their male counterparts (41%).
- Nearly one-third (31.93%) of female-owned businesses were in the service industry. Retail (15.07%), accommodation and food services (9.07%), and healthcare and social assistance (7.41%) made up the remaining majority of women-owned businesses.
While some of the metrics decreased from the previous year, it’s worth mentioning that it was not all uncommon due to the pandemic. Many businesses in the U.S. faced record challenges during an unprecedented two years during COVID-19’s heightened presence in the U.S. and the world.
The women-owned business study also makes it clear that it’s becoming easier for women to qualify for business loans. And in fact, women secured more financing last year than in previous years.
So how do you get funding for your business, and what is the best way to go about it? Here are some things to consider.
Understand the unique challenges women face in owning a business.
It’s no secret that the hurdles women face in becoming business owners are different from those experienced by men.
Traditionally, women have had to overcome more societal and social expectations than men have. Female entrepreneurs also find balancing their family and business life more challenging.
Factor those things in with the fact that getting funding for your business is difficult for anyone and sometimes harder for women.
These realizations can be even more challenging to grasp when you realize that men have dominated business for a long time.
But things are changing for female business owners, and they’re changing for the better. The gap between male and female business ownership is narrowing, and before long, there will be just as many women who own businesses as there are men who own them.
And just about anyone, women included, can get a business loan if they do their homework and research their options.
Create a solid business plan.
Anyone who envisions owning their own business must take steps well beforehand to see it come to fruition. A business plan is your roadmap to success. It’s like a GPS for getting from Point A to Point B and beyond.
Your business plan should include a comprehensive overview of your business and the products or services you intend to offer, and who your target consumer is.
Your plan should include 3 to 5-years of financial projections that explain how you intend to grow your business’s revenue and the factors you believe will help you succeed.
Showcase your strengths as a business leader and include profiles of other key people in your company.
Also, consider including a marketing strategy to help achieve your goals. What will you do to attract consumers to your business and build a client base?
If you’ve already started your business and intend to grow your business through additional funding, your business plan will need to include your financial statements. These include balance sheets, income statements, and cash flow statements.
Other items to consider including are:
- Licenses and permits relating to your business.
- Other legal documents.
- Your resume or business history.
- Reference letters.
A business plan is not something you sit down and create overnight. It often takes months before you have a solid business plan.
While you’re compiling what you need for your business plan, it’s also a good idea to take that time and improve your credit standing as much as possible. A good credit score will improve your odds of getting approval for a small business loan to have the capital you need to grow your business.
Take advantage of resources available for women entrepreneurs.
Female entrepreneurs can benefit from several resources that are uniquely available for women. These include training and business development programs, mentors and support networks, educational opportunities, and business grants.
In particular, several organizations, including the Small Business Administration, offer grants and other resources, some of them exclusively for women.
While the SBA offers several kinds of grants, not all are only for women. But female small business owners can still apply and take advantage of their grant opportunities. The point is, with a bit of diligence on your part, you can apply for a grant and possibly receive free funding for your business.
Even though you likely won’t be able to fund your business entirely through grants, these opportunities can help you get your business off the ground, and you can get the remaining capital you need for your venture with a business loan.
The advantage of having grant money to allot towards your business is that if you still require a loan, it will be a smaller loan with less to repay.
Get fast funding for your business.
Whether you are just embarking on your business journey or you’re already in business, you need to fund your business at some point. There are several types of small business financing available for women.
These include real estate loans, term loans, lines of credit, and working capital loans, among others. Here’s a look at how they work.
A business owner will typically seek a term loan when a more considerable amount of cash is needed than what a working capital loan or line of credit will provide. With a term loan, a borrower receives a single, fixed loan amount upfront and repays the loan with interest over monthly installments.
You’ll likely need a strong personal and business credit history to get loan approval for a term loan, so term loans work better if you already have an established business.
Lines of credit
If you’re just starting your business, a business line of credit might work better for you. However, women who are already in business sometimes utilize a line of credit to help improve the cash flow of their business.
With a business line of credit, a lender pre-approves a predetermined amount of credit with a maximum limit. Then you can access funds for your business whenever needed, up to the limit established for your line of credit.
The advantage of this type of funding is that you only pay interest on your withdrawal amount. So, if you have a $15,000 credit limit but only withdraw $5,000, you will only pay interest on the $5,000.
The disadvantage of lines of credit is that the interest rate charged against the amount financed is likely to be higher than with a term loan. But if it’s what you need to build a more favorable credit history to get a term loan, that works to your advantage.
Working capital loans
Working capital is the money your business needs for operating expenses. This includes inventory or equipment, wages for your staff, one-time business expenses, utilities, and even expanding your business.
A working capital loan can help cover these expenses as well as seasonal shortfalls in revenue. This type of funding can help keep your business operational during downturns or until your revenue increases.
Commercial real estate loans
A commercial real estate loan is often needed when you purchase or refinance real estate for your business, typically a brick and mortar location where you operate your business.
Some business owners also use a commercial real estate loan to refinance or consolidate business debt or renovate their business’s physical property.
Typically, you’ll need to have been operating your business for at least 18 months before a lender will consider approving a real estate loan.
Speaking of lenders, you’re probably wondering who the best lenders are or where you can apply for a business loan.
Best lenders for women-owned small businesses
There are different options when it comes to applying for your business loan. Here’s a glance at some of the financial institutions to consider when funding your business.
Smaller community banks, credit unions, and big banks are some of the more traditional funding options for women-owned businesses. But qualifying for one of these loans has become more complex over time.
For this reason, traditional bank financing isn’t as popular as it once was, and women entrepreneurs often look for easier and faster ways to get funding for their businesses.
The Small Business Administration (SBA) provides loan guarantees for approved business owners. These loans are typically administered through SBA-approved lenders, and the government backs the loans.
SBA loans are better options than traditional bank loans, as the program allows for longer repayment terms and lower down payments.
But the loan process is quite lengthy, and they’re typically harder to receive approval for, so in the end, business owners tend to seek a faster funding option.
Direct online lenders and marketplaces
In recent years, online lending marketplaces have become a more popular business funding option. This is because the application process is typically more streamlined and much faster. Whereas it can take several months to even learn if you’re approved for a traditional bank or SBA loan, it can take days with the right online commercial lender.
Some online lenders are better than others. There are many fly-by-night online lenders that literally pop up overnight and haven’t established a reputation in the industry.
On the other hand, Biz2Credit is an online lender that has been around for 15 years, almost since the inception of online small business lending. And the founder and CEO of Biz2Credit, Rohit Arora, has historically given special consideration to minority and women-owned businesses.
Biz2Credit also understands that time is of the essence when you want to get your business off the ground. That’s why we will strive to fund your business as quickly as possible, sometimes in as little as 48 hours.
Look to the success story of Jyoti Sharma. Sharma had long dreamed of owning and operating her own Ayurvedic day spa. The bank told her she’d have to wait three months to get funding for her business idea.
But Biz2Credit offered her immediate fast funding with the same interest rate that the bank had offered. The loan process was much easier as well, with less paperwork involved. It was so easy that Sharma is a repeat customer who came to Biz2Credit for a second round of funding.
Are you an aspiring female entrepreneur hoping to hop on the train towards a woman-owned business venture? Contact Biz2Credit today to learn how fast funding can make it happen for you.