Microloans for Women-Owned Small Businesses

Lauren WardUpdated May 4, 2023

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

There are 12.3 million women-owned businesses in the U.S., and they generate 1.8 trillion dollars per year. Yet just 7% of all venture capital funds go to female founders.It’s important for women business owners to explore all financing options to launch and grow their companies. One accessible source could be microloans for women. While microloan amounts are smaller than traditional bank loans, they can provide the extra boost your business needs until you’re able to go after bigger financing options. Many microloan programs also offer mentoring and business resources to help give female entrepreneurs what they need to succeed from the outset. Here’s a look at how microlending works and how to find the right microloan for your venture.

Microloan Programs for Women Business Owners

Microloans typically focus on providing funding to women, low-income, veteran, and minority entrepreneurs, along with small business owners who find it difficult to get approved for traditional types of business loans. They’re generally offered by nonprofit, community-based organizations and have a maximum loan amount of $50,000.Below are five commonly recommended microlenders (based on a Google search of “best microloans for small businesses” done on April 25, 2023) that offer loans to women-owned small businesses.

Accion Opportunity Fund

The Accion Opportunity Fund (AOF) focuses on lending to diverse clients. More than 90% of the organization’s clients are women, people of color, and/or low-to-moderate income. The AOF doesn’t set a minimum credit score requirement; annual revenue requirements vary depending on the loan program.AOF offers microloans of $5,000 to $100,000 with repayment terms of between12 and 60 months, and doesn’t charge prepayment penalties. Interest rates depend on your credit and financial situation but range from 5.99% to 17.99%. In addition to financing, AOF offers educational resources, coaching, and support networks.

U.S. Small Business Administration (SBA) Microloans

The SBA Microloan program doesn’t focus specifically on women, but is committed to offering funding to small businesses that may not qualify for other types of SBA loans. The proceeds of these loans can be used to pay for a variety of business expenses, including working capital, inventory, furniture, or equipment. SBA microloans are funded by the SBA and administered through a network of community lenders (called intermediaries). Microloan amounts can go up to $50,000 but the average loan amount is $13,000. The maximum repayment term allowed for an SBA microloan is six years. Interest rates vary depending on the intermediary lender bur generally ranges between 8% and 13%.

Kiva

Kiva is a nonprofit peer-to-peer lender that helps new businesses in underserved communities access crowdfunded loans. Female (and male) business owners may borrow up to $15,000 at 0% interest. The process works differently than other types of small business loans. After filling out a brief application form, you’ll then have up to 15 days to invite your friends and family to lend to your business. Think of it as a referral. You’ll then have 30 days to raise funds on the Kiva platform, followed by up to 36 months to repay the loan. A fringe benefit that comes with borrowing through Kiva is that your lenders could also become customers.

Grameen America

Grameen America has invested over $3 billion with over 169,000 female business owners. The organization is also addressing the even greater financing gap faced by minority women business owners and female business owners living below the federal poverty line. Their microloans are also reported to Experian to help female entrepreneurs build credit as well. The process for applying for a Grameen America microloan is different from other lenders. You start off in a small group of women and together take a financial training program. After that, you’re eligible to receive a microloan as you continue to network and learn during weekly meetings.

LiftFund

LiftFund offers a range of small business loans, including microloans and SBA loans to entrepreneurs in the following states: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Missouri, Mississippi, New York, New Mexico, Oklahoma, South Carolina, Tennessee, and Texas.The lender doesn’t only work with female-owned businesses but specializes in providing funding opportunities for startups that may have limited credit, collateral, or experience. In order to be eligible to apply, you must be at least 21 years old. Additionally, your business cannot be in the adult entertainment industry and you cannot have an active bankruptcy. LiftFund also provides educational support for borrowers, including a digital library of resources to help you learn new skills like marketing, finance, and management.

How to Find Microloans for Women-Owned Businesses

There are a number of lenders that provide microloans for small businesses or entrepreneurs, including women. You can find microloans through government affiliated organizations, nonprofit organizations, community development organizations, the SBA, the U.S. Department of Agriculture (USDA), and other lenders.

Microloans for Women: Eligibility and Requirements

Each lender has its own eligibility requirements for approval. You’ll likely need to own a portion of your business and may also need to meet requirements for how long you’ve been in business. While credit qualifications may vary, lenders typically require that you have no recent bankruptcies, foreclosures, or tax liens. Many lenders may also want to see a clearly defined business plan. Check for eligibility requirements as part of your search for small business microloans for women to save yourself time and improve your chances of success.

How Can I Use a Microloan for a Woman-Owned Small Business?

Allowable microloan uses may vary by lender. The SBA program, for instance, allows the money to be used for a range of business-related expenses, such as working capital, inventory, and equipment. Peer-to-peer lenders, however, may require you to outline for potential investors how you plan to use the funds. Either way, for your own sake, it’s a good idea to have a clear plan for how you plan to use the funds and what results you expect to achieve because of the microloan. That way you may be more likely to use the funds to achieve your goals.Recommended: Guide to the Working Capital Cycle

How to Apply for a Microloan

To start, you’ll need to find a lender and make sure you meet the requirements for the loan. Often you apply for a microloan online.Each organization will have its own application process but you’ll likely need to gather some basic information and financial statements for your business. You’ll likely also need to have a detailed business plan, as well as a plan for how you intend to use the proceeds of the loan. In some cases, you may also need to show proof of collateral, which is an asset you will use to secure the loan.

Additional Resources for Women-Owned Small Businesses

There are a number of resources available to support women business owners. Nonprofit organizations like the National Women’s Business Council and the U.S. Women’s Chamber of Commerce are good starting points. You can also explore local and online support groups in your industry. This can be a great way to network, learn from other women’s experiences, and even find new clients. These resources may also help you identify small business grants for women and other types of financing.

The Takeaway

Women-owned small business microloans can help take your company to the next level. If you’re curious about what type of microloan, or other type of small business loan, your female-owned business might be able to qualify for, Lantern by SoFi can help. You can use our fast online search tool to get a personalized small business loan option in minutes.Let Lantern help you find the right financing solution for your small business.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Photo credit: iStock/andresr

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About the Author

Lauren Ward

Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.

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