Women are an indispensable part of the small business ecosystem everywhere. The American Express 7th Annual State of Women-Owned Business in The United States Report says it all. About 40% - 13 billion -of all small businesses in the US are women-owned. In total, these businesses generate about $1.7 trillion in revenue annually and employ about 9 million workers.

Unfortunately, women have had to succeed against all odds. Historically, traditional financial institutions and venture capitalists have looked down upon business loans for women, making it harder than average for women to access financing.

Things have changed recently, and there are alternative lenders and programs offering grants and small business loans for women.

Why banks aren't a friendly financing option for businesswomen

Gender bias

Doesn't everyone deserve the chance to obtain startup capital to fund their business dreams? Yes, but it's easier said than done. Gender bias in traditional banking institutions is a major hurdle for women seeking capital to jumpstart or grow their businesses.

One study shows that women are 15%-20% less likely to be approved for a small business loan than their male counterparts. Overall, Women receive less than 16% of all conventional business loans. The odds are stacked against them.

The same holds for venture capital. For example, in 2017, women received only 2.2% of venture funds. That's 16x less compared to what men received. It's even worse for minority women-owned businesses that only received 0.2% of the venture funds that year.

All these stats speak to one thing: Due to gender bias, the traditional lending landscape hasn't been favorable for women, making it a hassle for female entrepreneurs to access funding.

Banks require an excellent credit score

Banks will require you to have a FICO score of 680 and above to qualify for a loan at favorable terms. You've to use credit to build a solid credit history and an excellent FICO score. Traditionally, women have faced hurdles accessing the funds and the information they need to build a credit profile. As such, having poor to no credit is a major obstacle to obtaining business loans at a bank.

You need collateral to qualify for a loan at a bank

For a long-time, women haven't had the right to own property. It's still a reality in the modern world. To secure a loan at a bank, you need collateral, many years of doing business, outstanding business revenues, and, as mentioned above, an excellent credit score. Lack of collateral makes banks a not-so-good option for women when it comes to obtaining small business loans.

Unfavorable credit terms and fear of rejection

What happens when banks see you as "high risk"? They either turn you away or hit you with high interest and unfavorable repayment terms to cover the risk. According to a 2014 Majority Report of the U.S. Senate Committee on Small Business and Entrepreneurship, banks are more likely to reject a loan application coming from a woman. If it goes through, women end up receiving smaller loans than men.

Due to this unwelcome reception and fear of rejection in traditional banking institutions, women either refrain from applying for credit in banks or apply for less than they need to cover business expenses. Women end up receiving $5,000 less in credit than men.

Lack of banking tools and information

According to the World Bank, more men than women have bank accounts (55% men vs. 47% women) globally. This isn't solely the banks' fault, but still, limited access to conventional banking information and tools required to access credit in banks makes business loans for women elusive.

And due to this lack of funding, the U.S Senate report shows that women are less likely to receive relevant business training and counseling.

Alternative Friendly Funding Options For Women

While Banks and venture capitalists, statistically and traditionally, may not be friendly funding options for women entrepreneurs, there's hope. Over 20 alternative sources of small business loans for women have sprouted to help bridge the gap.

One top crop of such lenders is online lenders, who use technology to process loans without leaving home. If you face rejection at banks, online lenders are more likely to give you a white glove treatment and approve you for a loan without the need for collateral of outstanding credit score.