For female entrepreneurs in male-dominated fields, staking a claim in the business world can be challenging. This is especially true when women apply for business loans, a notoriously difficult task for entrepreneurs of any gender.
A study by the California Reinvestment Coalition found that small business loans given to female-owned businesses in California have dropped 70 percent since 2007, and it's likely that other states have also seen a drop in small business lending to women. Even if a female business owner is financially secure, it's more than likely she'll be turned away if she hasn't been in business long enough.
Business News Daily spoke with financial professionals and female entrepreneurs, who provided the following tips for women-owned small businesses looking to secure loans. [How to Apply for a Small Business Loan]
Build relationships in your business community
Small business lenders want to know that the companies they're investing in are headed for success. That's why it's so important to establish yourself within your local business community before you try to apply for a loan.
"It is essential for female business owners to build relationships in their business communities," said Anne Hopkinson, owner of Haydenville Broomworks. "Part of being a trusted small business is building these relationships, and this can take time."
To get started, Hopkinson recommended looking for small business support groups in your area, such as university mentorship programs or small business development centers. Many advisers at these organizations work with lenders, and their professional relationships can benefit you in the loan-application process.
Have your financial information organized
Nothing will get your loan application denied faster than having your finances in disarray. Monica Guevara, manager of small business lending at nonprofit small business lender VEDC, reminded applicants that lenders need to verify all the information you give via documentation. So having the necessary statements and reports organized and ready for review will demonstrate that you've done your homework.
"Each lender will have different requirements, but you can stay ahead of the game by having your tax returns, P&L statements, and other financial documents organized and available," added Evan Singer, general manager of SBA loan provider SmartBiz.
David Goldin, CEO of alternative small business lender Capify, recommended getting a copy of your credit report before you apply, to make sure everything looks accurate.
"If you have any old vendors or delinquent accounts, clean them up," Goldin said. "Once you see your credit report, you can figure out what product you're eligible for."
Seek out women-specific lending programs
No matter where they apply for a loan, female entrepreneurs face a lot of competition. However, some lenders have implemented loan programs dedicated to women-owned businesses to make it a little easier for these business owners to receive funding.
"We've historically seen women underrepresented with coed funds, and the emergence of funds that are earmarked specifically for women is a new and exciting trend," said Marina Lee, founder of Women in Tech Network and Startups Edge.
Lee suggested applying for general loans and women-centric programs simultaneously to increase your chances of receiving the money.
Explore your lender options
As with any other major financial decision, it's always a good idea to explore all options before making a final choice. Greg Simmons, PNC Bank's southeast SBA sales manager, said that business owners should spend time shopping around for the lender that suits their needs.
"Even though a loan request may be eligible, not all banks have the same appetite for industries, projects or rates," Simmons told Business News Daily. "Consider the costs of a full relationship, not simply the rate of the loan."
While chain banks are certainly a good place to start your loan research, independent lenders are another option to keep in mind.
"Authorized small business lenders can be much more personal, and therefore more likely to give you the money," said Hannah Lavon, co-founder of Hooray Hoopla, parent company of accessories retailer Vs. Stuff.
However, Singer reminded entrepreneurs that loans are not all created equal. Quick loans from alternative lenders can be costly: Loans from online lenders can have rates ranging anywhere from 30 percent to more than 120 percent, he said.
"On the other hand, inexpensive loans can be extremely labor-intensive," Singer said. "Traditional banks often require mountains of paperwork, [and] months of back-and-forth and rejections are common."
Know what you need, and prove you'll use it well
Being able to explain to a lender the exact proposed amount and purpose of your loan is perhaps the most important factor in getting approved, next to proving financially stability. Vague loan requests often make a lender wary, so being prepared with specific information can only help you in the loan-application process.
"The business owner should understand not only how much funding is needed, and for what, but [also] that the funds are very likely to produce results based on their knowledge and experience," Guevara said.
"Be prepared with full financial information and current debt service for your business," Simmons added. "Know specifically what your request is for and what benefit it will bring your company."
If your credit is good, you may be approved for a larger loan than you actually need, but Goldin cautioned against borrowing all that money if you can get by with a lesser amount.
"Only take as much as you need," he said. "Determine the right amount of capital for your business needs and really have a plan for your money. Don't borrow it for the sake of it being available."
This article was originally published in 2014 and was updated Dec. 22, 2015.