A recent speaker to an Aiken and national audience said women own 14 million businesses in the U.S., which is about 39% of all businesses, a mixture of independent companies and franchises.
They employ than 11 million and generate two and a half trillion dollars in income. In 2024, women launched 49% of all new businesses.
The challenge is locating a funding source.
The unique challenges facing women small business owners looking for funding were the focus of a recent webinar.
Offered by Greater Aiken SCORE, the webinar was led by Rieva Lesonsky, CEO of Small Business Currents LLC, and highlighted traditional bank loans, SBA options, crowdfunding strategies, and grants.
“Startups need money. You need to have cash at the beginning to buy your stuff, whether you know if you’re going to sell stuff, you need cash for inventory, operational capital, to pay your rent, and to get the right equipment that you need. Cash allows you to grow,” she said. “If you don’t have cash flow coming in, you’re not going to be able to grow and to prepare for any crisis that might happen. But most banks don’t lend to startups.”
Lesonsky said most banks prefer to lend money to businesses that have been in operation for five years and have physical inventory that can be used for collateral. Banks also look at credit scores, and male entrepreneurs have higher credit scores than women entrepreneurs.
One alternative, she explained, is to apply for grants; however, the process can be complex, it is very competitive, and there are many requirements that must be met.
Loans, Grants, and other funding….
“But I have to tell you, I’ve been doing this webinar for about three years now, and there’s a lot more grants out there,” she said. “It’s really good to see more and more companies providing grants for all entrepreneurs, and a lot specifically directed at women business office, market, and competition. Still, it’s hard to get funding in a crowded market, because you have to make the case for why somebody should bet on you and not your competition.”
A well-known option is to pursue funding through the Small Business Administration (SBA), and there are lenders with a preferred relationship.
“There are what they call preferred SBA lenders who have a relationship with the SBA for a long time, and sometimes the SBA trusts them to make the decision,” she said. “Remember, the SBA does not lend money itself. The SBA is a guarantor of the loan. The SBA will tell the bank it will cover 70% of that loan if the borrower defaults. So, the bank is a little bit happier if you have an SBA loan, because if you default, they know they’re going to get a certain percentage of that loan covered from the SBA.”
Some women entrepreneurs and business owners decide to self-fund with credit cards, generally using personal credit cards because a business credit card also requires a scoring system, similar to getting a loan.
“What I would recommend if you can’t get a business credit card is to get a personal card. Get one that offers a lot of rewards or use one of yours if you already have one, and set it aside for only those needs,” Lesonsky advised. “Even though it’s a personal card, don’t put your personal expenses on there. Just use it for your business expenses. It makes it a lot easier at tax time. Easier for you, easier for your accountant, and easier for the IRS if there ever is a problem.”
Among the non-traditional ways to fund a business, Lesonsky said women can consider setting up a crowdsourcing option, allowing interested people to contribute to the business. There are also so-called “angel investors,” high-net-worth individual that provides funding in return for an equity share of the business.
No matter what funding source women entrepreneurs choose to pursue, Lesonsky said an important step is to create a compelling pitch. First, know your audience, and then craft a pitch with a winning story, address existing markets and competition, and get quickly to the point.
The webinar is available online at
https://www.score.org/event/loans-grants-and-other-funding-options-women-owned-businesses
