The Need For Alternative Lending In Female-Led Small Businesses

The Need For Alternative Lending In Female-Led Small Businesses


Despite the economic and social advances of female business owners, too few are taking advantage of the benefits afforded by alternative lenders to expand their operations. With the country recently honoring females in the workplace with both Women’s Small Business Month during October and with Women’s Entrepreneurship Day falling on on Nov. 19, now is a great time to showcase and highlight the tremendous efforts women have made in the world of business.

Female-led companies on the rise

NerdWallet recently released an infographic illustrating the gains made by women in companies large and small. For instance, women-owned businesses grew 27 percent from 2000 to 2012, while new U.S. businesses merely averaged 2 percent growth rate during this time period. This signifies a promising shift on the economic landscape, which is becoming much more welcoming for female entrepreneurs. Still, no matter the gender or race, business owners face significant challenges on a regular basis, including finding the necessary funding to reinvest in the business.

However, while women-owned businesses have made much headway in the past 10 to 20 years, there is still ample room for improvements. NerdWallet’s infographic also highlighted how far women still have left to travel, as females only comprise 15 percent of corporate executives, despite accounting for 52 percent of college graduates. This gap has created a lot room for burgeoning female entrepreneurs to carve out their niche in the business world. In an effort to help female entrepreneurs, some alternative lenders have begun offering small business loans for women that are tailored to the growing demand of women-owned businesses.

Setbacks to business

Operating a business on a razor-thin profit margin might be enough to keep the doors open each year, but it might not necessarily provide enough working capital to reinvest in the business, whether it be in new technology, additional inventory or hiring more workers. Without being able to grow the company, female small business owners will continue to lag behind their male counterparts in terms of revenue and growth opportunities.

Despite not having the necessary funds to re-invest in the business to scale up operations, there are many ways female business owners can locate additional capital. Unfortunately, the options are not being utilized. According to a recent Gallup survey commissioned by Wells Fargo, only 9 percent of women business owners plan on applying for new credit during the course of the year, while 21 percent of male business owners have plans to obtain new credit.

The benefits of alternative lending

The Gallup/Wells Fargo survey did not go into the specifics of why such a small number of female small business owners planned on seeking out loans or new lines of credit. However, with 55 percent of female respondents claiming they felt extremely or very confident in their ability to get a loan, it’s surprising so few are taking advantage of this route. With so many female business owners citing their confidence in obtaining credit, yet with so few actually planning on getting this capital, it can ultimately lead to a lack of growth in this otherwise thriving sector.

Even if a company is successfully attracting and retaining customers or clients, there still might not be enough revenue coming into the business to reinvest for expansion. It can be costly to restructure operations and scale up, no matter how successful the current model is.

Applying for a small business loan or a merchant cash advance can be just the answer many female business owners are looking for to get over that hurdle. Working with an alternative lender can provide that crucial capital injection female-led businesses often need to expand operations. Often, women-owned businesses can receive the funding they need with minimal paperwork and with little, bad or no credit.