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Things All Single Moms Need To Know About Raising Funds For Small Business
If you are a single mom suppressing your bream to be a business owner, here is some good news. You can fulfill your dream with the easy accessible finds that are available now in the market for small businesses. These loans are specially designed for those aspiring mothers who do not have the required fund to become a successful business owner. However, you will need to know a few things first regarding the small business loans for single mothers. Remember, being a single mother and looking for a business loan, both are difficult but there is nothing to be disheartened especially when you have survived worse situations.
The life of a single mother is full of challenges and unpredictability as it is. It becomes even more difficult if you want to start a small business and keep it running as well. The business risks and operation are even higher considering their responsibility as a single parent. The consequences are greater and more severe if you make the wrong choice. Therefore, you as a single mother must know the how to figure out the best option for funding for your business. It will pay off well if you are fully informed about your options before signing on the dotted lines for the loan.
Where to start
To start with your business funding endeavor you must first know where to start from. Irrespective of the type of funding you choose, there are three basic things that you should do:
- Check your credit score: You must know your credit score before you apply for a business loan. Check it from any of the three major credit agencies, Experian, Trans Union, and Equifax. Your credit score is the first and most significant tool for the financial institutions to assess your eligibility for the loan and ability to repay the specific type of loans.
- Find a reputable lender: The next thing you should do is conduct a thorough research to ensure that the lender of the business loan is reputable. You may find more than a thousand options on the internet, but beware that not all are created equal and all are not legitimate. The most feasible way to check credibility and reputation of a money lender is to verify it with Better Business Bureau to check its rating.
- Draw up a business plan: This is the third and final step to follow when you are done with your credit score, eligibility and finalized on a couple of business loan lenders. Almost all money lending institutions will ask for a proper and detailed business plan along with your loan application. This enables them to see the prospects of your business. Even if a lender does not want it and you decide to go with that lender, it is prudent to have such a business plan. It will help you to know how exactly you will utilize the money and also determine the amount of loan you need, your ability to pay it back on time, evaluate and make estimates for your future revenue and earnings.
You can use The Small Business Administration or SBA template for this purpose which is the universal model often recommended by https://www.libertylending.com/ and several other experts.
Consider government business resources
It is recommended that all single mothers seeking financial assistance for starting a small business contact the SBA’s Women’s Business Center. You will get all necessary information from these centers that also offer:
- Financing opportunities
- Online resources
- SBA loans
- Loan guarantees
- Contracts
- Counseling sessions and other assistance.
Apart from that, you may also consider other different federal government programs such as the Community Development Financial Institution Program, CFDI. This is the initiative of the Treasury Department and works with SBA. It helps single mothers develop their small businesses in the under-served communities but lacks access to any traditional financing. It is a tailored resource that offers innovative programs investing federal dollars along with private sector capital.
Different finance options
There are different financing options for single mothers wanting to start a small business such as traditional banks and alternative lenders.
- Traditional banks: These can be both large and small. These will typically have a very strict standard for making loans to you. You will need to have a high credit score of over 700 at least. You will also need to have properly maintained financial records for at least three years, a very detailed business plan and other relevant documents. The approval rates from these banks are as low as 25%. However, if approved, you will get much lower interest in bank loans as compared with other institutions.
- Alternative lenders: It may be a bit difficult to find a bank that will be offering a loan willingly to single mothers but you can search of business loans from a slightly different financing route. Alternative lenders also offer small business loans along with merchant cash advances and traditional business loans. These lenders are more flexible with their loan requirements, and need a lower personal credit score of may be 500. The documentation process is also significantly less as compared with the major banks.
But before you sign on the dotted line you must read the terms and conditions of the business loan. There may be several clauses and terms that may put you and subsequently your family at a considerable risk if you are unable to repay it back on time. Avoid applying for too many loans because each application will directly impact your credit score.
As for the alternative lenders, you must be more careful as the rate of interest in their loan will be higher than the traditional big banks due to your higher risk. Check the BBB rating before you pick one and make sure the reputation of the lender is solid.
A final thought
Give a final thought so that you are very sure before you take on the loan. Plan way ahead of the approaches to overcome the challenges by avoiding toxic people, being proud of being a single mom business owner, working harder and looking for someone who will support your dreams
