By James Walter and Corey Ross
One of the biggest challenges to growing any successful business is the ability to obtain capital. Although thousands of business owners apply for bank loans and to venture capital firms each year, businesses run by men receive 95% of venture capital financing, while businesses run by women receive a mere 5%. Furthermore, according to the organization Women Accessing Capital, women business owners typically apply for loans four times before succeeding. All in all, we’ve noticed that sometimes women entrepreneurs have been at a disadvantage when it comes to securing capital for their companies, but there are ways they can increase their odds of success, even in the middle of a murky credit environment. Here are three.
1. Ask: Less than 50 percent of women-owned businesses sought capital for their businesses in 2009, and there’s reason to believe a significant portion of this is due to simply not asking or not being the traditional targets of lenders. This leads us to our next point…
2. Educate: You can’t ask before you know what your options are. Through educating women business owners about financing options and about business strategies to help facilitate growth, women will seek out more financing. There are several general types of commercial loans, including:
- Secured business loans – requires upfront collateral to back the loan and usually carries lower interest rates
- Unsecured business loans – as the name implies, is not a collateralized loan and generally carries a higher interest rate
- Alternative financing – certain types of companies can secure a loan by selling their accounts receivable through a process called factoring. Other types of higher interest rate loans exist in this category too, and can be a lifeline if your company needs bridge financing.
3. Organize: Many women today are juggling the demands of their careers and family like never before, and have honed their organizational skills and attention to detail because of this – which is incredibly valuable in operating a small business. In order to increase your odds of securing a loan, do the prep work, including:
- Watching your personal credit history
- Compiling complete financial history of company – tax returns, outstanding loans, etc.
- Provide proof of business longevity: Is your industry taking off? Has your company been profitable for a number of years? If not, why do you expect this to change?
Once you have a solid understanding of your financing options and your industry and company’s prospects, you will be poised to take your company to the next level.
James Walter, CEO, and Corey Ross, VP of Sales, founded loan automation technology provider BBC Easy to help financial institutions and borrowers reduce costs and increase efficiency by streamlining the expensive and highly inefficient Borrowing Base Certificate process. A free version of their software is available now for borrowers at www.bbceasy.com.