Business loans for women

There has never been a better time for women entrepreneurs to access growth capital for their businesses. Why is that? With so much competition in the lending market, lenders are offering excellent interest rates, along with favourable terms and quick approvals.

However, the Rose Review Progress Report 2022, found that female entrepreneurs receive less funding on average than equivalent male business owners — at every stage in the lifecycle of the business. Now is the time for lenders of all sizes to level the playing field and match the male lending landscape.

So, what are my options as a female founder? Women in business have four primary types of business loans that will suit the majority of businesses: unsecured business loans, secured loans, merchant cash advances, and revolving loans. 

Unsecured business loans

Female business owners in need of cash to grow their business, but who have only recently started trading, might lean towards an unsecured business loan. This is a type of loan that is issued without security and is ideal for new businesses or businesses operating in an asset-light industry. If you need cash quickly, a variety of lenders will offer up to £250,000 — the amount available will depend on cash flow projections and convincing lenders with detailed business plans. 

It might seem like a catch-22 situation for a lender to demand security from a new business with little or no assets. Take, for example, a software-as-a-service provider. A company selling software won’t have the type of assets that are usually put forward as collateral like plant and machinery or cash. This is exactly the reason why some lenders understand the need for unsecured loans. They will, of course, require a personal guarantee, which reduces the risk to the lender in the case of a default. Some considerations of unsecured business loans include:

• Speed — no valuations are required, so the legal process runs quickly

• No assets put forward — lenders understand that some businesses don’t have or don’t want to use assets as collateral

• Lower upfront costs — tend to be cheaper at the outset than secured loans

• Interest rates can be higher as the risk to the lender is increased

What’s a personal guarantee?

Many business banks in England and Wales will require a personal guarantee from female business people. This may feel like a massive burden, but it is often the only way an entrepreneur can get larger sums of money issued via business loans. By offering a personal guarantee to a third-party creditor, namely a bank, you accept full responsibility for any unpayable debt owed by the company. With a personal guarantee on the table, lenders can offer much better rates and repayment terms.

Secured business loans

In contrast to an unsecured business loan, acquiring a secured business loan will require you to offer up some valuable business assets like machinery, vehicles, or commercial property. For lady business owners, that don’t want to put forward a personal guarantee there are several lenders on the market. 

Secured business loans work in the same way as other types of loans for women, but in this case, the lender will offer you a loan in proportion to the value of the assets you put forward. For example, if you are running a business with plant and machinery, you could offer this as security, and in exchange, a lender would offer you a considerable sum of money for your growing business. A much smaller amount would be offered in return for a commercial vehicle or cash-in-hand.

You’ll be glad to hear that in return for putting forward your assets as collateral you can avail of fixed interest rates — so you won’t have unexpected price hikes over the repayment period. On offer are usually short, medium, or long-term secured business loans, and the amount you’ll be eligible for will reflect the value of balance sheet assets put forward. Commonly, 100% of the market value of the asset will be matched by the lender.

Merchant cash advances

Female entrepreneurs seeking a new source of business finance might not be aware of an alternative funding option called a merchant cash advance. This type of business funding is well suited to small businesses registered in England that accept debit and credit card payments from customers. The lender issues cash advances, which are then later repaid by the borrower as a fixed percentage of customers’ card payments. This is an ideal way to get cash quickly in a bid to manage challenging cash flow situations. Depending on the lender and application process, you can get approved for a merchant cash advance within 24 hours.

The speed of access to cash has resulted in this type of financing option becoming increasingly popular as a type of small business loan. Many businesses use business credit cards to access instant cash, but in comparison to merchant cash advances, the rates are much lower, especially if you don’t pay off the balance in full at the end of the month, which is always a risk. This type of funding gives you more control over your finances, as repayments are matched to customer card payments

Revolving loans

The final type of funding for female entrepreneurs that we will cover in this article is similar to an overdraft and is known as a revolving credit facility. This could come in handy if you need to buy more stock unexpectedly or cover a supplier bill at a time when cash flow is low. It’s similar to a working capital loan and will work for a broad range of SMEs. You can withdraw cash, repay it, and then withdraw more cash without the hassle of applying for an entirely new loan facility each time. The money is there for you when you need it most. The amount of money that you can obtain is dependent on your credit rating and financials. Usually, one month's revenue is a typical loan amount on offer.