Determining the Necessity of a Business Loan for Women

In the past decade, the number of women-owned businesses has boomed, bringing the of businesses owned by women to an all-time high. Defined by the Small Business Administration as a business with an ownership of 51 percent or more by one or more female persons, women-owned businesses are on the rise, ranging from corporate firms to at-home, online retail stores. With the increase in women owned businesses, it is obvious that the necessity of business loans for women are also greater than ever before.

Most commonly, women seeking capital to finance their small business ventures tend to consider a loan. Loans are available for women in all types of businesses, ranging from bed and breakfasts and catering, to pet supplies and photography, to craft businesses and consulting. Loans for women entrepreneurs are intended for enterprises in which women are majority shareholders, and in which the business is also managed by one or more women.

As with any other business, loans are often required to purchase inventory, to expand or improve a line of equipment, or to build or remodel a building to house the business and its employees. Business loans for women can also be used to help with marketing the business and its products or services to the appropriate target market.

Before jumping into applying for a loan, however, determine the necessity of a business loan. Turn to your written business plan, and consider the following factors when weighing out the pros and cons of obtaining a business loan for women.

1. Is the business in need of inventory or equipment?
If the business requires additional inventory or needs new or updated for business expansion, a loan can offer the capital needed to purchase these items.

2. Is the business having difficulty with sales, production or in other areas due to much-needed company updates?
If business can potentially expand and bring in more profits with additional funding, the necessity of a business loan may be crucial for the business to move forward and at the same time, stay competitive with other businesses in the same field.

3. Are there new ideas, products, or areas of service to be expanded upon to increase production and profitability of the business?
The necessity of a business loan can be very high if there are areas in which to expand that require capital. If obtaining a business loan for women can potentially increase profits, and if the loan can be determined to be of low risk to the business and the loan payments fit into the current business budget, the necessity of a business loan for women is probably a positive step in the right direction.

Determining the necessity of a business loan for women can also bring other factors into consideration when actually deciding to move forward with a business loan application, including the following positive aspects of obtaining such a loan:

1. The risk in obtaining a loan for a business owned by a woman may be slightly less than that for a business owned by a man.
Not only do some banks and lenders recognize this, but women business owners also enter into loan payments due to confidence of making business improvements through a loan. Women tend to have a different business sense than men, and their non-traditional choices and style of operating a company tends to be successful. This is due to the fact that women simply tend to have a different view on possibilities and opportunities.

2. Many loans are created especially for businesses owned by women.
In some loans, both through the Small Business Administration and through some lenders, the application will focus on the woman's character, credit, experience and reliability rather than assets. Because the necessity of a business loan for women can be crucial for a business' survival, these such loans offer a wonderful opportunity for those women with good credit. Additionally, women with poor credit can also obtain these such loans, though collateral is usually required.

3. Special loans are available for more nontraditional businesses.
As an example, there are loans available for those with young children who wish to create a small, home-based business.

Before stepping into a loan, or even applying for a loan, look at everything involved to determine the necessity of a business loan.

- Carefully examine and list purchases to be made with the loan. Remove unnecessary purchases from the list, or make a separate list for future purchases in which can be used with money earned by the business, or can be put on a future loan once this first loan is paid in full.

- Consider the term of the loan, and make sure that it's not too long or too short for your business' specific needs. If you haven't applied for the loan already, determine an acceptable term based on your budget and needs.

- Examine the monthly payments required, or determine a monthly payment to present to the lender that would easily fit into the business budget. Don't try to squeeze in a higher payment in hopes of earning more money with the business due to obtaining the loan. Falling behind on just one payment can eventually lead to financial disaster for the business. Remember, it's difficult to "catch up" on payments once they've fallen behind.

- Research the service of the lender. If you've worked with a specific bank or other financial institution for several years and have a good amount of trust in then, it is probably safe to apply for the loan there. Don't apply for a loan with a bank or financial institution that you know nothing about. Do your homework first.

Rebecca Game is the founder of Digital Women , an online community for women in business. A 30 year entrepreneur and dedicated to helping other women find business loans. Visit her site: http://loans.digital-women.com

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