Tips for Women Business Owners Seeking Financing
By Mary Warhurst
Building a business usually requires borrowing money. But, in the past, most female business owners had to finance their businesses using their personal credit cards. Why? Because they were denied access to capital.
Happily, that kind of discrimination is disappearing; lenders can no longer afford to pass up the growing market of female business owners. Some lenders even go out of their way to make financing available to women.
Business Lenders is one example. Since it was founded in 1994, Business Lenders has made at least 40 percent of its loans to women - because it's good business. Fortunately for female entrepreneurs, other financial institutions are beginning to recognize that fact too.
Female- owned businesses are growing rapidly everywhere. And fast-growing businesses need ready access to capital to finance an increase to workforce or inventory, to purchase new equipment, to take advantage of discounts for early payment, or to buy their own buildings.
Here are four tips for women business owners who may be skeptical about their ability to get financing.
Don't give up! Just because one institution turns down your request for financing, don't assume all the others won't be interested. Each lender has a different comfort level and credit criteria. Business Lenders has made loans to hundreds of women who tell us their requests for financing were rejected by six or seven other institutions. Women who end up with capital are the ones who don't' quit trying.
Do your homework first. Before you approach a prospective lender, think through how much money you need, how you're going to spend it, and why. Put all your facts and figures down on paper. Be clear and concise about what you need and how it will help grow your business. Try to anticipate all the possible questions the lender might ask, and have your answers ready. Doing your homework is half the battle.
Pick your lender carefully. Lenders have their niches. Many won't lend to start-ups, franchises, environmentally questionable businesses such as gas stations or dry cleaners, or businesses in certain industries. Ask each prospective lender about its prohibitions, both written and unwritten. Then pick a lender who matches up with your needs and the profile of your business.
Learn about credit scoring. Many lenders judge the strength of a borrower's ability to repay loans by a formula. It's called credit scoring, and it uses strict calculations based on a borrower's credit history to evaluate the credit worthiness of the borrower. Because of the limited factors it evaluates, credit scoring often automatically rejects loans to women business owners. Look for a lending institution with a better understanding of the variables that make up credit worthiness.
The keys to business success are desire, planning, managing risk and growth. Women entrepreneurs who demonstrate all four should find it easier to get financing in 1998.
Ms. Warhurst is executive vice-president of Business Lenders and is based in Providence, Rhode Island.
