small business finances

Women entrepreneurs face unique financial challenges. According to 99designs’ 2018 Women in Business” report, the difficulty women entrepreneurs face raising startup capital cascades into a series of problems that make it harder to compete and contribute to women-owned companies generating $68,000 less annual revenue on average than companies headed by men.

Stereotypes about what an entrepreneur looks like play a big role in this credit gap. However, just because you can get pushback from people who think you’re not cut out for entrepreneurship, you don’t have to listen to it. If anything, it’s one more reason to pursue your goals and prove to the world — and yourself — that entrepreneurship is for everyone.

Funding Options for Women Entrepreneurs

Unless you’re independently wealthy, you’ll need funding to start and grow a business. Venture capital is an important source of funding for many startups, especially in the tech industry, but it’s also heavily male-dominated (women raise only 2% of all venture capital dollars, according to Quartz). Thankfully, VC isn’t the only option.

Traditional term loans, short-term loans, and SBA loans

Small business loans are ideal for major investments into your business. A loan provides a fixed amount of money for a specific purpose, with a set repayment period. Traditional term loans are the standard, while short-term loans offer faster processing and shorter repayment terms when less money is needed. If you struggle to qualify for traditional loans, look into SBA loans. These government-backed loans offer advantageous terms to small business owners.

Business credit cards and business lines of credit

Credit cards and lines of credit are types of revolving credit, which means you can access the funds as needed. As long as you pay it off on schedule, you can continue using revolving credit as a source of working capital. If you need a large amount of credit, choose a business line of credit. If you’re covering smaller, short-term expenses, opt for a business credit card.

Other funding options

Entreprenuers have options beyond traditional funding sources. If you need access to small amounts of working capital or need to buy new equipment for your business, equipment financing and invoice financing are two options to consider. Since these funding options rely on collateral, you don’t need perfect credit to use them. Also, don’t discount the possibility of free money. Crowdfunding is an increasingly viable option for women entrepreneurs and there are a number of small business grants targeting woman-owned businesses.

Managing Business Finances

After your business has launched, you need to keep it afloat. Staying on top of finances is a big challenge for entrepreneurs — financial woes are the leading driver of small business failure. Rather than falling into the same trap as many entrepreneurs and trying to do it all yourself, hire an accountant to handle these financial matters.

Keeping records and paying taxes

Accurate records are key to staying on the IRS’s good side. Records also give you the information you need to assess your business’s financial health. The basic records every small business owner must keep are gross receipts, purchases, expenses, and payroll records. In short: If it involves spending or receiving money, record it and keep it on file for three years in case you get audited. If you’re running a home-based business, you’re at an increased risk of getting audited.

Creating financial statements

Synthesizing records into financial statements allows you to assess finances at a glance. Financial statements also help you overcome the fear of failure that stops you from taking risks. When you have data to illustrate your success, it’s harder to get sidetracked by self-doubt. Financial statements also help you make a strong case when applying for funding. With financial records to back you up, financiers are less likely to pigeonhole you or write you off completely. Every small business owner should maintain a balance sheet, income statement, and cash flow statement. You can learn more about these essential documents at SCORE.

There’s a lot that goes into running a small business, from diving into market research to nailing down your branding. But with the right financial resources, you can set yourself up for success from the beginning.

By Jim McKinley of Money with Jim