Women-owned businesses are the fastest growing segment of entrepreneurs in Canada and account for roughly 38 percent of the small businesses in our country. And, like many other small business owners, they sometimes rely on borrowed capital to purchase inventory, fuel growth, and meet other business needs. Yet traditional funding sources make fewer small business loans for women than their male counterparts.
While these businesses share many of the same challenges faced by most other small businesses, small business loans for women only account for a small percent of the total dollar amount of small business loans in Canada (according to the Sub-committee on Small Business and Entrepreneurship). With that in mind, here are three financing tips for women business owners that will help them prepare and qualify for a small business loan:
- Avoid using personal credit to pay for business expenses: Although many early-stage entrepreneurs access their personal credit when starting a business, it’s not a good long-term financing strategy as the business matures. It may be convenient when expenses are low, but as your business grows and the need for capital increases, relying on personal credit becomes problematic. What’s more, using your personal credit doesn’t help you build a strong business credit profile and may even hurt your personal credit score. As soon as possible, start looking for ways to build a strong business credit profile. A good place to start could be Home Depot, Lowes, Staples, and other suppliers that offer products business owners often need and offer business credit to their customers.
- Ask your suppliers if they offer payment terms: Although 30- or 60-day terms from a vendor might not be the same thing as a $50,000 or $100,000 business loan, if your business is an early-stage business, establishing a strong business credit profile now (or during the early stages of your business) can help you qualify for a loan down the road. What’s more, the same applies if your business has a few years under your belt—establishing (or even re-establishing) a strong business credit profile is important. Many vendors routinely offer credit accounts to their customers; and this is one of the best ways to start building a strong business credit profile. It’s also important to make sure they report your good credit history to the appropriate business credit bureaus. If they don’t, you may be building a good credit reputation with that particular vendor, but you’re not doing anything to build a strong profile with the credit reporting bureaus. This is important enough that you should always ask and encourage any vendors that don’t report now, to do so.
- Don’t be afraid to look outside the bank: The first place most business owners look when they need a small business loan is the bank where they already have a business checking account, maybe a credit card, or their personal banking accounts. While this might seem logical, it might not be the only, or best, place to search. Banks typically look for businesses with a few years track record, $1+ million in annual revenues, and a personal credit score of 680 or better. Although the bank could be a good option if you qualify, there are other lenders (including online lenders like OnDeck), that will work with younger businesses and measure the health of the entire business rather than just the personal credit score of the owner(s).
If you’ve been in business for at least a year, have annual revenues of at least $100,000, and have a healthy business, a small business loan or line of credit from OnDeck could be a good fit for your situation. OnDeck offers loans from $5,000 to $250,000 in Canada and has delivered over $11 Billion to businesses just like yours.
Instead of waiting weeks or even months to hear back from the bank, once you complete an easy online application, you can have an answer in a few minutes and, if approved, have the loan proceeds deposited in your account often as quickly as within 24 hours.