Growing a business requires more than just an idea to thrive; it involves finances, taking inventory, and ensuring smooth daily operations. When it comes to finance, securing the necessary funds for your start-up can be challenging for women entrepreneurs.

However, there is an escape route through the provision of more funding opportunities from alternative options aside from the well-known traditional means. Alternative options, such as crowdfunding, grants, peer-to-peer lending, and others, have helped women in business and significantly contributed to economic growth and diversity in the marketplace.

With these funding options in place, women entrepreneurs can easily navigate the complexities of starting and running a business, break barriers, and redefine the known traditional business landscape. In this blog post, we will outline the various alternative funding options for women entrepreneurs and their importance, and clearly explain the tips on how to access these funds.

What is Alternative Funding?

Alternative funding is a form of finance that operates outside the traditional institutional finance system of banks. It is a finance beyond the formerly recognized traditional means that operates within the banking sector and capital markets.

Using an alternative funding system helps you explore other approaches to funding, beyond public sector grant funding. With this, you are privileged to explore several alternative options to fund projects when public sector funding is scarce. To determine the most effective options for your objectives, consider the following types of alternative financing available for your consideration.

1.  Crowdfunding

Crowdfunding platforms such as GoFundMe, Kickstarter, and others were created by a large number of people who contribute a relatively small amount of money with the sole aim of raising funds for a new project or venture. Crowdfunding is a valuable alternative financing tool that offers financial solutions for women entrepreneurs who have struggled to secure loans or obtain investments at the same rate as their male counterparts.

It serves as the perfect option for entrepreneurs seeking funds to start a new business, support business expansion, or help their business recover from the pandemic.  This platform is typically done via the Internet through a crowdfunding site, also known as a crowdfunding platform. 

2. Grants

Grants are free money provided to businesses, often small enterprises and startups, in sectors such as technology, agriculture, healthcare, and fashion. It is mainly offered by non-governmental organizations (NGOs), private organizations, and government agencies to startups and women entrepreneurs to help stimulate economic growth, promote innovation, and support the development of specific industries or communities.

Most businesses use these funds to expand, implement new technologies, and create jobs. Although business grants do not require repayment like loans, they certainly come with some criteria, such as the need to match funds, create a certain number of jobs, or operate within a specific jurisdiction. Since they are most time awarded, they seem competitive to receive.

Amongst the hundreds of organizations and government agencies that support women entrepreneurs through grants, here are a few of them 

•  Amber Grant and Patrina Foundation Grant, which awards $10,000 to a women-owned business monthly. There are hundreds of organizations supporting women through grants. Additionally, grants are a fantastic way to obtain funding without sacrificing equity.
• The SoGal Startup Grant for Black Women offers vital financial support to predominantly U.S.-based Black women and non-binary entrepreneurs, providing grants ranging from $5,000 to $10,000. It helps these entrepreneurs scale through their various businesses.
• The Tory Burch Foundation offers a variety of programs and initiatives to support women entrepreneurs. These programs offer financial assistance, educational resources, and networking opportunities to support women in growing their businesses. To be eligible for this offer, a woman must own at least a 51% stake in her business.

3. Peer-to-peer Lending 

P2P lending, also referred to as social lending, implies that borrowers can obtain loans from individuals who are willing to lend their money at an agreed-upon interest rate. It is a form of debt-based crowdfunding, where borrowers raise funds by engaging multiple investors. 

On peer-to-peer lending platforms, borrowers are required to fill out an application where their risk and credit are assessed, and an interest rate is then assigned to their profile. Individual investors carefully view the profile of a borrower and assess whether they want to risk lending their money to them.

If they can, borrowers will then receive the total loan amount from the investor or multiple investors. Borrowers on this platform tend to obtain a lower interest rate than they would have gotten at the bank. N.B. All monthly repayments are made through the peer-to-peer platform.

4. Equity Investment 

In an equity form of investment, investors give you money in exchange for a share in your business or company. Most of the time, this option is best recommended for women with fast-growing startups who are open to relinquishing some control. 

5. Pitch Events

Also known as a competition, where you are given the chance to showcase your business idea or product. After which, winners receive cash prizes, gifts, mentorship, or even long-term funding for their business.

6. Microloans 

This is another ideal funding option that bypasses traditional bank loans, allowing business owners access to small capital. Microloans range from $5,000 to $50,000 and serve as an excellent option for startups that lack access to traditional financing. They are a viable alternative, mostly offered by non-profit organizations and community lenders. Some organizations, such as Kiva and Accion, provide microloans with favorable terms to women entrepreneurs who might not qualify for traditional bank loans.

7. Capital Firms That Focus on Women’s Empowerment 

Some venture capital firms, such as BBG startups and Female founders, build their business mission around supporting female entrepreneurs. These firms provide substantial funding alongside other benefits such as mentorship and networking opportunities.

Importance of Alternative Funding Options To Women in Entrepreneurship

Alternative funds come with so many benefits for women in business by providing;

• Capital for Business Startup and Expansion: Small business grants for women entrepreneurs can provide the financial boost needed to start up a business. It can also expand an existing business through investment in new technology, hiring additional staff, developing new products, or entering new markets.
• Access to Networking and Accurate Mentorship: In most cases, these grants or funds provide not only financial support but also mentorship opportunities to help women entrepreneurs navigate the complexities of running a business.
• It Creates a Sense of Belonging: Women entrepreneurs, after receiving funds from alternative platforms that value their contributions, feel recognized and supported. This helps in fostering a sense of belonging to a larger entrepreneurial community.
• Educates and Develops Skills: Many women-targeted microfinance institutions, NGOs, and grant programs include workshops and training on entrepreneurship skills, digital skills, budgeting, bookkeeping, pricing, and reinvestment strategies. They ensure that women not only receive funds but also learn to properly manage and effectively multiply them.

Factors to Consider When Choosing a Funding Option

1. Determine the Financial Need For Your Business: Before choosing the right fund option for you, you must evaluate your business needs. Consider what you need the funding for by checking out your business’s short and long-term goals; how much funding is required; and the time frame you want the funding to last.

2. Check Out the Criteria for Obtaining Funds From the Organization: Government grants could be challenging to obtain due to their strict eligibility requirements and criteria. Which is why you must review repayment schedules, interest rates, fees, and associated risks to ensure the terms align with your financial capabilities. This will enable you to make the right choice and avoid unnecessary wastage of time.

3. Consider Your Business Goal: In selecting the right funding path as an entrepreneur, your business goal should be considered because it determines the kind of funding or grant you should apply for. For example, a woman planning on establishing a quick hair salon business should look out for microfinance loans, savings groups, or grants, as they are faster to access and less complicated to handle.

But this is not the case for someone building a brand with long-term impact like an export business or setting up a manufacturing firm. Alternative fund options, such as crowdfunding or venture capital, are their go-to choice.

4. Consult an Expert for Proper Guidance: Consult with a financial advisor or accountant who can assist you in evaluating your options and making the best decision for your business. This will save you time and increase your chances of success. 

Common Challenges Female Entrepreneurs are Likely to Face

Women entrepreneurs have recorded successful business stories, yet still faced awkward situations that have, in one way, hindered them from moving forward. Some of such challenges are;

1. Gender Bias: The assumption that women only start businesses for lifestyle reasons, unlike their male counterparts, who are more focused and determined, is outdated and inaccurate. Female entrepreneurs launch and scale companies across all industries, from technology to finance to sustainability to agriculture, cutting across various sectors globally.

2. Social and Cultural Discrimination: Many cultures have long believed that women are not made to be in charge of businesses and firms; instead, women should spend significantly more time on childcare and family alone. This has limited their time available to dedicate to their companies and building themselves.

3. Poor Mentorship & Lack of Business Education: Only a few women have access to mentors and role models in entrepreneurship. This has shaped their mind in a certain way and has affected their business development, making them less likely to believe they possess the necessary skills to start a business.

4. Creating a Work-life Balance: Most women find it difficult to create a balance between work and life. In most cases, these two aspects intertwine, making one suffer and the other vice versa.

Tips for Accessing Alternative Funds From Sponsors / Organizations

Alternative fundraising strategies encompass a diverse range of methods, with each organization having its own unique advantages and challenges. To qualify for a fund or grant for your business, there are certain requirements your investors wish to see.

• A Strong Business Credit Profile: As an entrepreneur, having a strong business credit profile is crucial for securing loans, negotiating favorable payment terms, and maintaining financial stability. To develop such attributes, female entrepreneurs should prioritize paying bills on time, clearing outstanding debts, and regularly monitoring their credit scores. Having a strong business profile is also achievable by:
  • Registering your business
  • Understanding your finances by ensuring a clear and accurate bookkeeping.
  • Growing an online presence (social media marketing): As an entrepreneur, you can take your business global by engaging various social media platforms. This, in a way, serves as a form of advertising, bringing the public’s attention to what you do.
• Have Comprehensive Business Plans: Female entrepreneurs should have business plans that outline long-term financial goals, visions, target market, revenue models, and anticipated expenses. A comprehensive business plan has a way of increasing the likelihood of approval, as many lenders and investors seek strategic growth plans.
• Community involvement and social impact: Participating in community service and social activities has a way of improving your reputation and earning trust from your investors.
• Networking and asking reasonable questions: Many investors find it easy to invest in businesses to which they are personally connected. Women entrepreneurs should reach out to these networks through industry associations or mentorship programmes.

Conclusion 

Alternative lending has rewritten the rules of business financing by empowering startups and small businesses with faster and more flexible solutions than traditional banks can offer. Whether you are interested in the community-driven nature of crowdfunding or the swift speed of invoice financing, there are options to fit virtually any business need.