I share the five types of funding for women business owners and companies, plus an easy-to-use online directory to help entrepreneurs find resources to capital.
You’ve heard of this saying, ”It takes money to make money.” And as much as I cringe when I hear this, the statement is true. To launch a business, you need some capital (money for day-to-day operations or growth) to get it off the ground or sustain its livelihood.
You can use your own money or explore capital funding options for small business owners. The good news is that there are various ways to raise capital for your business, especially funding for women business owners of owned businesses.
Access to funding doesn’t mean using the same bank where you opened your first checking account. Other viable options could be a better long-term fit than just going to your local bank.
There are main five types of funding that a small business owner should explore:
Five Types of Business Funding
In this article, I’ll provide a brief description of each type of business funding and share an easy-to-use Capital Directory designed to help women owned businesses connect with lenders or organizations.
1. Community Development Financial Institutions (CDFI)
The mission of the CDFI program is to work with public and private financial institutions to provide economic opportunities to underserved communities by providing access to affordable loans and banking services. The financial institutions involved with the CDFI program are typically community banks and credit unions that are certified by the U.S. Treasury to provide accessible loans and business funding.
Their services offer financing programs to help business owners build credit, receive access to loans or lines of credit and establish goals for saving⏤ultimately assisting the community in economic growth.
You can use the CDFI’s award database navigation tool to find a local bank or credit union that may have funding to help your small business.
2. Small Business Funding with Angel Investors
Both Venture Capital and Angel Investor funding come from accredited investors who use their own money to invest in businesses. To be an accredited investor, the Security Exchange Commission (SEC) states, an individual with gross income exceeding $200,000 in each of the two most recent years or joint income with a spouse or partner exceeding $300,000 for those years and a reasonable expectation of the same level of income in the current year.
This form of investment takes place outside the public stock market, in which investors gain a stake in the company with a percentage of ownership.
3. Business Funding Through Grants
A business grant is a sum of money awarded to a business owner, company, or organization. The money is given to the business without repaying the awarder. Most business grants are set up for philanthropic reasons or intentions to support a specific community or segment of business owners.
Most grants require an application process, which could be lengthy or extremely competitive to win. A business grant is never a never a guaranteed financing option and should only be considered as a possible capital supplement. However, every business owner should look into ones they could qualify for.
4. Funding Your Business with Loans
A business loan is a sum of capital on credit from a lender. All loans involve creating debt that requires repayment to the lender with interest (a borrowing fee added to the total loan amount). The lender could be a bank, fintech company (financial technology), financial loan company, or a credit union.
Regardless of which company or financial institution you go with, the loan terms and interest rates will vary depending on the business’ credit history. If your business hasn’t built a credit history yet, lenders will most likely turn to your personal credit score. Typically, many business loans require a personal guarantee of repayment if your business can’t make payments.
5. Crowdfunding For Your Business
Crowdfunding for your business is small amounts of capital pulled from a large group of people to help raise funds for a specific cause or project during an allocated period of time.
This approach to funding allows business owners to raise money beyond their inner circle or professional network thanks to the accessibility of social media crowdfunding platforms like GoFundMe or Kickstarter. The investors can donate as little as $10 and may get to participate in the launch of a new product or receive a gift for their investment.
Business Funding Resource: Women’s Capital Directory
So, now that you know the five types of ways to raise capital for your business, it’s time to find your ideal lender or grant provider.
Seneca Women is a media company with a global social platform that focuses on advancing women and girls through education, mentorship, and networking. Their goal is to close the gap on economic equalities by providing resources for women business owners.
Seneca Woman and Bank of America
They most recently partnered with Bank of America and launched a Women’s Capital Directory to connect small business owners to various financial companies, institutions, and organizations.
I share a quick guide on how to use the platform.
How to Use the Women’s Capital Directory
- To start your search, go to the “Directory” header at the top menu bar.
- Enter general keywords women, minority, small business) or select an area of interest with the pull-down. You can also leave the keyword field blank.
Seneca Women and Bank of America Capital Funding Directory
- The “Type” field will indicate which type of capital you are interested in looking for by using the drop-down menu (you can refer to the above for the different types of funding).
- The “Amount” field will provide you with a pull-down menu with various dollar ranges for funding. You don’t have to select a specific amount; you can leave it blank.
Final Takeaway- Business Funding For Women
Asking for help can be difficult for any business owner. Asking for money to help fund the business can be even more challenging. But you don't have to rely on the same bank that you have been banking with since you were a teenager.
There are other viable options available for small business owners. You just need to take some time to explore and research the type of funding you are comfortable with.
No matter what type of funding you choose to go with, make sure the decision is not a quick fix for today, but try to envision how it will shape the future of your business.
