The Benefits of Small Business Loans vs. Grants for Women-Owned Companies

Access to capital is one of the challenges that female business owners face as they look to start up or grow their companies. American Express’ 2016 State of Women-Owned Businesses Report notes that there were in an estimated 11.3 million businesses owned by women in the U.S. in 2016 — up 45% since 2007. While the percentage jump was five times greater than the country-wide business growth average over the same time frame, that hasn’t made it any easier for women-owned businesses to get the money they need to finance their growth objectives. 

Often, the obstacles have to do with an old boys’ club mentality among fund providers. It’s challenging enough for new businesses to get funding, but it is undoubtedly more so for women. And the difficulty in obtaining financing comes on top of other challenges female entrepreneurs face, like achieving a good career-family life balance and gaining access to industry connections and professional networks.

Two available avenues for financing are small business loans and grants for women.

Small Business Loans and Grants for Women

Small business loans for women refer to money borrowed from banks, credit unions, or other financial services institutions by small businesses. While easier to obtain than grants, women owned small business loans can still be difficult to obtain from traditional lenders, since they tend to be risk averse when it comes to lending to small businesses, particularly those that don’t have a tangible credit history.

Consider, for instance, that one study shows that out of over 10,000 business owners that applied for financing from their bank a whopping 82% were rejected. Also, two-thirds of small business owners who did not apply for a loan, did so because they thought that their banks would refuse to lend them money.

If you do decide to apply for a traditional small business loan, consider the following points: small businesses usually pay loftier interest rates than larger businesses on account of the increased risks of lending to smaller companies, and you may need collateral in order to secure the loan you want. You may increase your odds of getting the small business loan you want if you have the following:

• Strong Business Plan: Put together a solid business plan that includes sections such as a description of your business, target demographic, and financial projections.
• Demonstrable Business Financial History: If you can, provide information on credit history, loan history, bank accounts, and audited business financial statements for several years. This info will help to win over risk-averse banks and credit unions.
• Personal Financial Information: Provide personal financial information pertaining to assets you may have such as property, investments, vehicles as well as liabilities such as mortgages, credit card debt, and loans.

Grants refer to funds that small business owners can apply for, and the key selling point is that these funds don’t have to be paid back as would a small business loan. The most common source of grants is the government, particularly at the local and state levels, but there are also grants available from private organizations or individuals.

While grant money may seem ideal since it doesn’t have to be paid back, the thing you need to realize is that competition for them is intense, so they’re even harder to obtain than small business loans. Grant application procedures differ depending on the provider, but here are some tips for boosting your odds of getting a grant from the government:

• Find Possible Grants: Your first bill of business is to find grants that you would qualify for. You can find a list of options on the U.S. government’s website dedicated to grants. When you find grants that are applicable to women-owned small businesses, carefully comb over the requirements. The grant application process can be, in a word, onerous, but the rewards can be great.
• Download Application: Once you’ve done your research, carefully looked over the requirements, and have determined that you qualify for the grant in question, you should download the applicable grant application.
• Register: When you do get to the government’s grant site, be sure to register. This is not just a formality — you actually need to do this so that you can send in your grant application.
• Carefully Go Over Instructions: Be sure to review the various steps of the grant application so that you can prepare a winning grant proposal.
• Write Up Grant Materials & Sent it in: In writing your proposal, be sure that you always keep in mind the requirements of the grant you’re applying for. There will be clear instructions of what is required of you, so ensure that you don’t miss anything. As soon as your finish the grant application process, you need to submit it in order to be in the running for the grant you want.

Small Business Loans vs Grants

When deciding whether a business loan or a grant is best for you, there are some questions you need to ask. What’s the objective for the loan? Are the funds needed to keep the business afloat, or to invest in growth? How important is it to access the funds quickly? These are some of the considerations before making a choice:

What’s the Objective?

Women-owned small businesses mulling over whether they should pursue a small business loan or a grant should first consider what their objective happens to be. Small business owners who need funds for more immediate expansion or growth plans would be better served with a small business loan. But if they have the patience to go through an extensive application process and the time to wait for the funds — if awarded — then a grant is a good option.

The objective cannot be considered in isolation of the actual amount you need. So, if you need, say, hundreds of thousands of dollars to achieve your objective, then you’ll almost always be better served with a small business loan since grants are typically only smaller amounts. With a grant, you might be limited to perhaps tens of thousands of dollars, which might not be enough for you to finance your strategy.

With a small business loan, you can basically get as much as your ability to pay will allow, which will usually be more than a grant would give you. So look at your objective and what it will cost to achieve it to determine whether your company would be better off with a loan or a grant.

What’s the Timeline?

Another factor that will determine whether a small business loan or a grant might be best is the timeline small business owners are working with. If there is no pressing need for funds right away, then a grant could still work since the months it might take between applying to approval might be manageable.

Small business owners who need funds sooner rather than later — perhaps within days — will almost always be best served with a small business loan over a grant. Alternative small business loans from companies such as Mulligan Funding could get you access to funds in one or two days. Also consider that the competition for small business loans is less severe than it is for grants, which means it’s easier and quicker to get the former than it is to get the latter.

Capacity for Repayment

Yet another thing to consider before choosing a small business loan or a grant is the capacity to repay a loan. One of the best things about grants is that they don’t have to be repaid, which is why they’re so popular. But this popularity is also the reason why they’re so competitive — and why it’s so much harder to get them than it is to get small business loans. Only a very small amount of people can qualify for grants.

Small business owners who are contemplating their options should mull over payback terms and interest rates before they apply for small business loans. That way, they’ll be able to determine whether or not they can afford a loan in the first place.

Funding for Women-Owned Businesses

There are some funding options — small business loans and grants for women — that are reserved specifically for women-owned businesses.

Here are just a few of the small business loans for women available:

• SBA Women’s Business Centers
• VA Women-Owned Small Business Program
• Key Bank
• PNC Financial Services Women Business Advocates
• Tory Burch Foundation Powered by Bank of America.

Here is a small handful of ideas for grants reserved for women business owners:

• Zions Bank — Smart Women Smart Money
• The Eileen Fisher Women-Owned Business Grant Program
• Huggies Brand — Mom Inspired Grants
• Wal-Mart Women’s Economic Empowerment Initiative
• eFedEx Think Bigger — Small Business Grant Program.

The Bottom Line

Traditional small business loans and grants for women can be great sources of funding for women-owned companies, but what do these businesses do when neither option is right for them? The solution is simple. Alternative funding like Mulligan Funding is a viable option for women-owned businesses that need access to capital and that don’t qualify for traditional small business loans or grants.

Our loans are advantageous to small businesses compared to traditional bank loans. While traditional bank loans usually require applicants to have been in operation for at least two year before qualifying for a loan, our minimum operation requirement is only six months. We’ll also work with you if your credit is less than stellar, while traditional bank loans usually will require that you have unblemished business and personal credit. Mulligan Funding offers fast approval — in as little as a few hours, in fact — while traditional bank loans might not be granted for weeks or even months. So, when you compare your options, it’s clear that Mulligan Funding is a great place to get the capital you need.

Call Mulligan Funding at 855-326-3564 to discuss your financing options today!

The information shared is intended to be used for informational purposes only and you should independently research and verify.

Note: Prior to January 23, 2020, Mulligan Funding operated solely as a direct lender, originating all of its own loans and Merchant Cash Advance contracts. From that date onwards, the majority of funding offered by Mulligan Funding will be by Loans originated by FinWise Bank, a Utah-chartered Bank, pursuant to a Loan Program conducted jointly by Mulligan Funding and FinWise Bank.