Three Ways Female Entrepreneurs Can Self-Fund a New Business
Discover the Right Self-Funding Options for Your Latest Venture.Kathy Longo, CFP®, CAP®, CDFA® Wednesday, 13 October 2021
For women who are ready to take control of their own earning power and work schedule, starting a business could be the right decision. After solidifying your vision for the business, the next step is figuring out how to fund your dream and transform it from an idea into a reality.
In the State of Female Entrepreneurship, a survey of 650 female small business owners conducted by Visa, more than 60 percent of women chose to self-fund their businesses. It might seem intuitive that this is the case. After all, these women are motivated self-starters with a vision they believe in, so it makes sense that they would self-fund their start-up. However, this is often a necessary move for female entrepreneurs, who report that it is difficult to secure traditional investors.
In the article below, we will explore some funding options available for female entrepreneurs who are considering self-funding.
When you think of self-funding, you are most likely envisioning bootstrapping, an approach that uses only the assets readily available to you in order to launch your business. Bootstrapping could include any combination of personal savings, retirement accounts, investments, and credit cards.
Bootstrapping is extremely difficult to execute successfully. Since finances are so limited, you have to be on top of your spending, tracking where the money connected to your business is going and any revenue that is coming in. A well-maintained budget will be your bootstrapping best friend.
What’s more, most start-ups take a while to turn a profit. According to an article in the Smart Business Chronicle, it’s impossible to pinpoint when a start-up will become conventionally profitable, but in most cases, it typically takes between two to three years. Before diving into business with your life savings through bootstrapping, make sure you can afford to do so – and that you can wait out the lean years in the beginning.
Find the Right Loan
A loan can be a scary prospect for someone taking the leap into entrepreneurship. Not only does it mean relinquishing a little of the autonomy you’re seeking by owning your own business, but it also brings up even more questions. How much should you borrow? Which lender should you use? What’s a good interest rate? How long do you have to repay the loan, and what happens if you default for some reason?
The Small Business Administration (SBA) is a valuable resource for aspiring entrepreneurs. Along with general information about funding your business, the SBA offers guaranteed loans that you may be able to access if a traditional business loan is not an option for you.
While the SBA doesn’t directly provide the loan, it partners with approved lenders to reduce the risk on the part of the lender while granting borrowers easier access to funding. In a sense, the SBA acts in a similar fashion to a co-signer, stepping in to cover the gap if a borrower defaults on the loan. You can access the Lender Match tool to see which SBA-approved lenders might be available for your business.
Other potential benefits of SBA-guaranteed loans include:
● Various loan options to meet your needs
● Lower fees and down payments
● Continued support, counseling, and education from professionals
Plus, the SBA has some resources specifically designed to support female entrepreneurs.
Landing a grant is a great option to fund your business. You can garner the financial support you need without paying to fund it yourself through bootstrapping or paying it back through a loan. Grants are an attractive option but there are only so many available, which translates to fierce competition.
In order to apply for a grant, you must make sure you and your business meet the requirements. Then, do your due diligence by researching the funding source behind the grant to determine whether it is a legitimate grant. Government grant scams abound in the digital age. Learn how to spot fake grants with these tips from the Federal Trade Commission.
You can find a list of reputable agencies by visiting grants.gov. Once you have a grant opportunity that seems like a good fit, check the funding timeline for it. While grants are wonderful for all the reasons we listed above, the timeline to receive the grant funding could be much lengthier than you need, especially if you’re trying to get your business up and running in a short timeframe.
Final Thoughts on Self-Funding
Investing in yourself and your dreams can be intimidating. But what if you changed your perspective from how scary it is to how exciting and bold it is? From bootstrapping to loans to grants, viable options exist to fit your business’s specific needs - you just need to find the right one(s).
I am dedicated to helping women succeed and flourish financially. It’s one of the reasons I founded my company, Flourish Wealth Management. As a female-founded company, we are especially attuned to the needs of women entrepreneurs. By working with an advisor at Flourish, you gain access to financial expertise and an entire company that’s working to make your dream a reality. Want to learn more? Contact me today!
About the Author
Kathy Longo brings over 25 years of expertise and experience to Flourish Wealth Management. Kathy is wholly dedicated to improving the life of each client and finds joy in making complex matters simple and easy to understand. She excels at asking the right questions, uncovering new possibilities and implementing the most advantageous strategies for success. Playing such a pivotal role in her clients’ lives remains an honor and a privilege. After earning a degree in Financial Planning and Counseling from Purdue University, she began her career at a small firm in Palatine, Illinois where she worked directly with clients while learning to build a viable, client-centric business. Over the years, she gained extensive knowledge and wisdom working as a wealth manager, financial planner, firm manager and business owner at notable, various sized companies in both Chicago and Minneapolis.