Businesses owned by women account for about 38% of small businesses in Canada and they are the fastest growing segment of entrepreneurs. Just like other small businesses they need borrowed capital to purchase inventory and other business needs and to grow their business. Despite the growth traditional funding sources give fewer loans to women than men despite all businesses sharing the same challenges.
Here are some financing tips for women owners that might help them to prepare and qualify for a small business loan.
1. Do not use your personal credit to pay for business expenses - although many small business owners use their own personal credit to start their business it is not a good long term strategy as the business grows. While your personal credit might be sufficient to get you started when your expenses are low as your need for capital increases using your personal credit can become a problem and it does not help your company to build it's own strong business credit score. It is a good idea to open business accounts with companies such as Staples, Home Depot and Lowes to help your business credit score.
2. Ask your suppliers if they offer payment terms - although this maybe not as good as getting a business loan but in the early stages of your business establishing a strong credit profile with your suppliers will help you to secure a loan down the road. Many suppliers offer a credit account to their customers and this is one of the best ways to start building a strong credit score, however it is important that they also report your good credit history to business credit bureaus. As this is so important you should always encourage your suppliers to do a report for you.
3. Look outside your bank - most business owners will try to secure a loan from the bank where they already have their business account or personal account. Although this seems to make the most sense those banks often have more stringent requirements for loans that new businesses cannot meet. It makes sense to look into other options for loans from lenders who are will work with younger businesses and measure the health of the whole business rather than the personal credit score of the owner. One suggestion might be the Business Development Bank of Canada. Visit the Canada Small Business Financing Program for more information on loans for small businesses.
From an article by Ondeck.