You need capital if you’re planning to start a business.

You could borrow from family and friends, but this is risky and can be emotionally draining. Instead, consider getting a business loan — the type of loan that’s specifically designed for small businesses.

A business loan is a good idea if you have a solid business plan, a track record of success, and the ability to repay the loan. They’re often easier to get than personal loans, and businesses with good credit histories can also get lower interest rates.

Loans for business start-ups are not exclusive to one gender; women also have the right to access loans. Getting a loan can increase your business’s chance of success, especially if you initially had minimal capital to work with.

Types of business loans for women

There are many types of business loans for women. These include:

• Micro-loans
• Merchant cash advances
• Asset-based financing
• Invoice financing
• Online loans
• Business line credit
• Terms.

Some lenders evaluate their loans in different ways, which helps distinguish them.

In Australia, you can compare Australia’s current business loan rates to assess the differences. This comparison enables you to understand the loan rates to help you as you make your decision.

Challenges women face in business financing

Women face many challenges in business financing. Here are some of the top ones:

• Lack of access to capital: Women are less likely to have access to capital than men. This makes it harder for women to start businesses, especially if they have families to support.
• Lenders’ gender biases: Some lenders may have biases when lending money to men vs women. They may perceive that women tend to have different business goals than men or are less capable of running successful businesses.
• Stereotypes about women in business: Other than the stereotype that women are less capable of running successful businesses, women may be assessed in aspects unrelated to their business and the loan, such as their personal life and responsibilities.
• Women being more susceptible to subprime loans: Women are more vulnerable to taking out subprime loans than men, especially those with poor credit histories and low incomes. These loans typically have higher interest rates and fees, carrying a significant risk of default.

Loans play a pivotal role in business growth. Without one, business capacity isn’t assured. Therefore, to survive the listed challenges, you must be intentional in finding suitable loans.

Finding small business loans for women

Being intentional with loans means looking at all factors in securing loans. These loans must work towards your benefit to accelerate business revenue.

Below are some of the things to look at:

1. Check the interest rate

The interest rate on loans can be frustrating.

You must be careful before taking a loan to ensure that the interest rate is something you’ll be comfortable with. You must make the necessary calculations and projections before signing on to a loan.

For example, if you take out a loan of AUD$100,000 at an interest rate of 5 per cent, the first year’s payment will be AUD$5,000. The second year’s payment will be slightly higher — about $5,250. It’ll keep going up as compound interest accrues on your outstanding balance.

2. Check your credit score

Lenders check credit scores to assess whether you can pay your loans.

If your credit score is low, they will be more reluctant to give you a loan or offer one with less-than-stellar terms.

Knowing your credit score before you start approaching lenders is an advantage. Your lender might provide you with a credit score different from what you know, thus giving you leverage.

3. Check the total loan amount

Knowing the minimum and maximum amount of money borrowed from your lender is advisable.

You can use this range in your projections and examine whether or not the amount is adequate. This way, you can avoid unexpected and significant risks in running your business.

4. Check the repayment terms

You must check the repayment terms before signing on to a loan. Loans with longer repayment terms usually have more interest, and vice versa.

Knowing how much of your business revenue will go towards repaying your loan is also wise. If a lender asks for a smaller percentage of your revenue, you may want to consider taking out the loan.

You can also ask for flexible terms that will allow you to choose your repayment schedule.

5. Check the credit requirements

The credit requirements for each small business loan will vary, so ensure you have met all the requirements before applying for a loan.

Usual requirements include:

• Proof of your business’ financial situation
• Your credit report and score history
• Current debts and liabilities
• Your income and assets
• The ability to make timely payments on any debts you have
• In some cases, a personal guarantee from the owner of the business.

When you meet all the requirements, you can conveniently apply for a loan and have a higher chance of being approved.

Consider the risks and benefits

Whether you’re starting a new business or growing an existing one, you’ll need capital to get things off the ground. But for many female entrepreneurs, disposable income is not readily available, thus requiring alternative funding sources.

If you’re considering a business loan, it’s essential to weigh up the risks and benefits. Consider speaking to a qualified loan broker so you can get professional advice regarding lenders and the types of loans available on the market.

You want to ensure that the lender is reputable and can provide the money you need when you need it most. The right business loan provider can help you overcome those initial hurdles and give your company a leg up against competitors.

Thankfully, the options listed should help you start or grow your businesses without compromising your personal finances or getting stuck in a cycle of debt.