Getting financial resources for their businesses is tough for many women. They frequently get denied after applying for loans from banks, and then find themselves wondering what to do next. If you’re in the same situation, it’s important to consider alternative financing, which may lead to a greater chance of success.
New Businesses May Struggle to Get Loans
Women who are operating startup businesses may find they are at a particular disadvantage when dealing with bank representatives in hopes of getting approved for loans. If a business is very young, banks may view it as a risk and end up turning women down for the funds they need.
On the other hand, alternative financing such as merchant cash advances and factoring may be better options. That’s because they’re associated with credit card receipts and unpaid customer invoices. If non-traditional lenders see women-owned businesses as consistently doing well even when they don’t have lengthy histories, they may offer funding because they can see the young businesses are actively generating income.
Banks Usually Require Good Credit Scores
One of the things that often influences whether a person gets approved for a bank loan is whether he or she has good credit. That can be an unfortunate reality for many female entrepreneurs who have gone through rough patches in life that have tarnished their financial situations, but are now much better off.
It can take years for a credit score to improve, and the reality is even harsher considering some entrepreneurs have mistakes on their credit reports that are there through no fault of their own. Some alternative financing options don’t require applicants to have good credit because the state of the business is the main characteristic lenders evaluate. Personal credit history never comes into play.
Business Owners May Only Need Small Amounts of Money
Some banks consider it unprofitable to give applicants small loans. Therefore, if a person just needs a relatively small amount of cash for something like computer equipment, a denial may be more likely. Some types of alternative financing are ideal for these situations because they give applicants quick access to small amounts of funds.
These are just some of the reasons why female business owners commonly realize it’s worthwhile to pursue non-traditional funding options rather than just heading straight to banks and hoping for the best. You may not feel your situation warrants ruling banks out altogether, but it’s in your best interest to at least see which other solutions exist.
