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The Challenges of a Female-Owned Business: How to Address Your Funding Problems.

The Challenges of a Female-Owned Business

Traditional lenders have a weird perception towards businessesowned by women and non-white entrepreneurs. But only a recent study revealed the extent to which this acuity is affecting the two demographics. Entrepreneurs cannot get far without financial backing and getting loans remains a major challenge for small business. According to a Federal Reserve Bank of Dallas,the chancesare even slimmer for a none-white or female-owned business.

The Status Quo

It’s sad that these two groups suffer even in Texas; one of the States where many would recommend for an entrepreneur looking to dive into business. Texas is considered one of the most business-friendly states in the U.S (or was, until this study showed some level of racial and gender discrimination). In fact, the U.S. Minority Business Development Agency revealed that non-whites are three times more likely to be denied micro-business loans by banks. The Agency also reported that Non-white and women entrepreneurs lack the vast network their white counterparts may have which limits their potential to grow. The few who manage to qualify for a loan or secure an investor often get small amounts of money as compared to their white competitors. And to add insult to injury, you may never get starting capital if you are female or non-white; which raises questions on what criteria banks and investors use.

Bridging the Gap

To bridge the wide financial gap, entrepreneurs of color and women business owners turn to credit cards and personal savings to keep their businesses going. In Texas, most of these entrepreneurs depend on small loans under $50,000. People of Color and Women are also introducing their own Venture Capital Funds. According to Charles O’Neill, CEO Texas Association of African-American Chambers of Commerce, there won’t be real change until traditional lenders change their attitude towards people of color and women and “start signing bigger checks.” Hopefully, these campaigns will open doors to more business loans for women as well as non-white entrepreneurs. Only intervention by banks and investors can help level the playing field for these two groups.

Small Business Loans for Women

It’s evident that women are increasingly turning their business ideas into reality,thanks in part to small business loans for women. With all qualities such as patience, commitment and hard work in place, financial backing, was perhapsthe missing piece, the last keyto solving the puzzle. Still access to starting capital and business loans remains a problem among growing female-owned enterprises. And the trouble is double if you have no idea where to search. So why does funding matter to you company and where can you get support when in need?

Why LoansMatter to Your Female-owned Business.

The process of starting a business comes with its challenges- you will need to balance your family or personal budget with a larger budget to accommodate your business. If you are completely out of options, try securing a small business loan to uplift your businesses to success. The Small Business Administration (SBA) has a program for women-owned business. It helps entrepreneurs meet the qualifications of a female-owned company and borrow money to support their operations. You can also seek funding from Banks, Credit unions, and other legitimatelenders.

How to apply for the Loan.

The SBA has different loan schemespurposelybuilt for women. The Office of Women’s Business Owners (OWBO) is responsible for setting the rules that apply for every grant or loan. To apply, you’ll require a good business credit statement (from any of the three reporting agencies) and a convincing business plan that will instill confidence in your lender. But what’s a lifewithout risks? After all, some of the top-rated companies in the world kicked off on shaky grounds. However, a business with low-risk has a better likelihood of acquiring a desirable small business loan. If you wish to acquire a loan, consult with thedifferent organizations working round the clock to help women achieve theirbusiness dreams. Some organizations offer availablecomplete details on the various loan programs they facilitate, and how merchants canapply. They include NWBC,Gateway for Women-owned Businesses Selling to the Government, andSCORE. Partnering with industry experts will ensure you female-owned business thrives. And when seeking for funding, the best way to prove to a lender you deserve the loan is by showing that you possess the inherent drive to rise above adversity.

Merchant cash advances as a last Resort.

A merchant cash advance is when the lending company offers abusiness an amount in trade for a percentage of itsoncoming revenue. The lent amount is later deducted from a business’s day to day revenue. Thus, there are no fixed terms in repaying cash advances: you basically agree on the amount and the percentage to be deducted off your sales upfront. This percentage is taken until yousettle the borrowed amount and agreed-upon fee. Therefore,a lower percentage doesn’t mean cheaper borrowing, and this figure isnot the same as your interest rate. Every lender charges a factor rate which you multiply by the advance amount to get the total payback (the full cost of the MCA). But because payback is on a day to day basis, you decide with the lender on what portion (holdback percentage) they can remit off your daily credit card transactions. And some lenders may add other fees to MCAs.

The Good and the Ugly

The Good

• Acceptance: all businesses are liable even those with poor credit and financial histories.

• Repayment depends on sales: unlike loans where you have to pay monthly.

• No fixed repayment schedule: the financing company simply deducts its percentage until you clear your debt.

The Ugly

• It’s a very expensive way to seek commercial finance

• Has a sky-high APR.

• Nature of repayments makes budgeting difficult

Now you can tell the difference between business loans and merchant cash advances. Choose the commercial finance option that suits you best at that particular time depending on the status of your female-owned business.

Steps to Grow Your Woman-owned Business.

The ultimate goal for every micro-business is to grow as fast as possible, and expand its bottom line. However, this calls for careful planning of operations— in a manner that will eventually prove sustainable and profitable. Growing merely to increase your business’s footprint does not seem right from a fiscal or operational perspective. So, what’s the most effective way to ensure your female-owned business is growing fast today without compromising its future? Here are some sure ways to go about it. 1.

Don’t rush to expand— have a clear path.

If developing a business was as simple as having the necessary finances to purchase or hire a larger space, employ more workers or arrange for more inventory, then we would stop at just that. Unfortunately, cutting corners to achieve growth is only fleeting joy that will turn soon turn to sorrow. Don’t rush to expand your startup minus a well-though out plan. As the head of your corporation, you certainly know a lot about your finances, operations, what’s popping in the market and other critical info. With this useful knowledge, you can establish if, when and how to grow your business. Use a conservative approach when expanding you female-ownedbusinessto avoid making rush decisions and increase your chances of winning. 2.

Have a Unique Selling Point—what makes you different?

Clearly defining your market segment is an effective way to grow. Segmentation is all about deciding the group of customers you’ll target and putting in resources to attract them. Having a unique selling point eliminates uncertainty and helps you make more focused growth decisions. Sadly, defining your market segment won’t be a very easy task; you’ll have to think outside the box. But the whole point is to concentrate on the groups of customers that are; most loyal, the leading revenue providers and are lovers of your brand. Identifying your target market presents the opportunity to plan and implement effective growth. 3.

Utilize the feedback from several sources.

At times, addressing the consumers need is the best approach to planning for business growth. You can do this by improving service quality in specific areas or offering a formerly unavailable service as requested by clients. However, don’t always let feedback dictate when you grow though they sometimes a form a crucial part of your decision-making. Also, be sure to seek feedback from different platforms and compare them. Utilize social media, conduct surveys, and seek feedback directly from customers that visit your shop are all viable ways to collect pointers.

And finally

Your female-owned business cannot go far without adequate financial backing. Search for funding in strategic places and use the finances to seize expansion opportunities that can expand your bottom line. If you have a poor FICO score, try a merchant cash advance but scrutinize the terms thoroughly to avoid a rip off.

Contributor: admin
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