Women generally are less likely to be approved for small business loans and can have a harder time obtaining financing for their businesses. Because of this, many female entrepreneurs explore a working capital financing solution.
Working capital financing is an alternative way to cover those day-to-day expenses without securing a larger investment or loan. By leveraging the business cash flow, working capital financing products are quick to obtain and offer many options to fit your business needs.
At Kickfurther, we’re working to help provide access to the funding female business owners need to grow their inventory and scale their businesses. Here’s how working capital can benefit women-owned businesses.
What is working capital financing for Women?
According to the Federal Reserve, female entrepreneurs are less likely to get approved for a small business loan than male peers. Working capital financing is a straightforward and simple way for women to get the funding they need to cover everyday operation expenses like payroll, marketing, and other short-term expenses that are necessary for running a business.
Working capital loans are secured loans that are paid out in a lump sum with a set repayment period. They’re often secured with collateral from the business, like unpaid invoices or equipment and are repaid over a shorter period of time. Alternative loans such as inventory loans or equipment loans can be used to free up working capital as well. Inventory loans and equipment loans are for a designated purpose and are usually secured by the purpose i.e. the inventory or equipment.
What are the types of working capital financing options available for women?
While working capital is a type of alternative financing, several different lending products fall under the working capital category. Some of the most popular ones include:
- SBA Loans: The Office of Women’s Business Ownership, a program coordinated by the Small Business Association, offers special resources and training to help women get the funding they need for their businesses. Specifically, the SBA offers a program called 8(a) Business Development, which helps smaller or disadvantaged companies obtain financing. Through this program, the SBA will help connect female entrepreneurs with lenders that are interested in working with them.
- Invoice Financing: With this working capital option, a business’s unpaid invoices are considered collateral to qualify for funding. Invoice financing involves selling outstanding invoices to a third-party company, which will offer the outstanding amount minus any fees.
- Merchant Cash Advances: Another common type of working capital financing is a merchant cash advance. This solution will give business owners a lump sum of money, which the borrower will then repay by providing a percentage of their credit card transactions to the lender. This is a good option for businesses that do a lot of credit card sales, but it can also be expensive depending on the factor rate of the loan.
- Inventory Funding: Inventory funding can be used to fund inventory and free up cash flow. At Kickfurther, entrepreneurs can secure inventory funding through a community of backers. Our solutions are up to 30% cheaper than alternative options.
Which financing option is best for women entrepreneurs?
Depending on your business model, the amount needed, and the repayment terms you’re able to afford, it’s best to explore all options to find the best fit.
As female entrepreneurs consider the working capital financing option that’s best for them, it’s crucial to have a clear picture of your business’s revenue. If your business has a lot of outstanding invoices, invoice factoring might be a good option for you. Or, if you don’t do many credit card sales, it’s probably ill-advised to move forward with a merchant cash advance.
What credit score is required to qualify for working capital as a women based entrepreneur?
One of the biggest benefits of obtaining a working capital loan is that the credit score requirements are less stringent than traditional financing. While a higher credit score will unlock the best rates, even borrowers with a low credit score of 500 can qualify for a working capital loan. This makes it an excellent solution for those who aren’t eligible for traditional financing or with poor credit.
Tips for applying for working capital financing
Applying for working capital financing as a female entrepreneur is a bit different than the process of applying for a traditional loan option. Since the qualifications are based on your business’s cash flow, here are some tips we suggest to boost your approval chances:
- Borrow only what you need – The lower the amount you need to borrow, the more likely you’ll get approved for financing. By only borrowing what you need, your repayment will be lower, and you’ll pay less in interest.
- Prepare and submit a business plan – Your lender will feel confident and assured that you have a clear way to repay the loan if you submit a thorough business plan with your application. This will outline your business goals, growth plans and a specific plan on how you’ll pay back the loan.
- Calculate your quarterly cash flow – One way to understand how much you should apply for is to have a clear picture of your business’s quarterly cash flow. Since working capital financing is secured by your company’s revenue, having a solid cash flow will help your approval odds.
- Shop for a lender that specializes in working capital – As you review all your financing options, it can be beneficial to pick a lender that specializes in working capital.
Are there tax advantages for women entrepreneurs?
While there is no federal tax code that benefits women entrepreneurs, there are some ways that minority business owners can benefit from certain tax incentives and programs.
The New-Markets Tax Credit is one tax program that offers incentives for investing in minority businesses in low-income areas. Investors who give capital or funding to qualified businesses can benefit from a 39% tax credit over seven years. This could help female entrepreneurs attract outside investments if they fall within the guidelines.
Additionally, there are tax breaks for businesses operating in an “empowerment zone.” These zones are outlined by the Department of Housing and Urban Development and the Department of Agriculture and provide tax credits for businesses operating in these designated areas. The “empowerment zones” have been designated as areas that could benefit from additional economic growth.
Make sure to speak with a qualified tax advisor to learn more about these tax programs and how they could impact your business.
How Kickfurther can help
For many female business owners, inventory is their largest operating expense. At Kickfurther, we connect women entrepreneurs with a community of buyers looking to fund inventory, allowing you to repay the financing on your own terms. Kickfurther will directly pay your manufacturer, giving you access to the inventory you need. And with customized repayment schedules, you won’t start making payments until you start making sales.
Kickfurther funds up to 100% of your inventory costs on flexible payment terms that you customize and control. With Kickfurther, you can fund your entire order(s) each time you need more inventory and put your existing capital to work growing your business without adding debt or giving up equity.
No immediate repayments: You don’t pay back until your new inventory order begins selling. You set your repayment schedule based on what works best for your cash flow.
Non-dilutive: Kickfurther doesn’t take equity in exchange for funding.
Not a debt: Kickfurther is not a loan, so it does not put debt on your books. Debt financing options can sometimes further constrain your working capital and access to capital, or even lower your business’s valuation if you are looking at venture capital or a sale.
Quick access: You need capital when your supplier payments are due. Kickfurther can fund your entire order(s) each time you need more inventory.
Kickfurther puts you in control of your business while delivering the costliest asset for most CPG brands. And by funding your largest expense (inventory), you can free up existing capital to grow your business wherever you need it – product development, advertising, adding headcount, etc.
If you need a fast and flexible loan for your business, working capital financing is a great alternative solution to traditional business loans. For companies that sell physical products or non-perishable consumables and have revenue between $150k to $15mm over the last 12 months, Kickfurther can help. We connect brands to a community of backers who help fund inventory on consignment and give brands flexibility to pay that back as they receive cash from sales. Kickfurther can help startups and small businesses fund millions of dollars of inventory at costs up to 30% lower cost than the competition. With more than $100 million in inventory funded to date, Kickfurther can help you get funded within a day or even minutes to hours.
Interested in getting funded at Kickfurther? Here are 3 easy steps to get started:
#1. Create a free business account
#2. Complete the online application
#3. Review a potential deal with one of our account reps & get funded in minutes
Learn more about Financing Options for Women Based Entrepreneurs