A guide to microloans for women-owned small businesses

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There are 12.3 million women-owned businesses in the U.S., and they generate 1.8 trillion dollars per year. Nonetheless, in 2019, less than 3% of all venture capital funds went to female founders. It’s important for women business owners to explore all financing options to launch and grow their companies. One accessible source could be microloans. Microloans for women are an option well worth exploring. While microloan amounts are smaller than traditional bank loans, if you’re a woman business owner, a small business microloan can add that extra boost that your business needs until you’re able to go after bigger financing options.

Microloan programs for women business owners

Take a moment to evaluate these top lenders for women-owned businesses. These five microloan lenders were chosen for their focus on empowering women business owners while offering funding at a variety of levels.

Accion Opportunity Fund

The Accion Opportunity Fund (AOF) focuses on lending to diverse clients. Almost 90% of the organization’s clients are women, people of color, or immigrants. The AOF offers business loans for women with bad credit as well as microloans for startups. Since it’s a nonprofit lender, the interest earned by AOF is reinvested in other small business borrowers. Qualifications needed for an AOF microloan include:

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  • At least 12 months in business
  • At least 20% ownership in the business
  • $50,000 or more in annual sales
  • 18 years or older

You can apply online and review multiple offers without hurting your credit score.

US Small Business Administration (SBA) Microloans

The SBA Microloan program doesn’t focus specifically on women, but it does offer funding to help any eligible business owner pay for things like working capital, inventory, furniture, or equipment. Intermediary lenders have their own eligibility criteria, so it may be a good idea to shop around. Microloans can go up to $50,000 but the average loan amount is $13,000. In addition to small businesses, this program also serves nonprofit daycare centers (a female-dominated industry). Applicants can apply through local community centers and may be required to complete training programs.

Kiva

Kiva is a peer-to-peer nonprofit lender that’s funded by individuals who choose loans to support. U.S. business owners may borrow up to $15,000 at 0% interest. The process works differently than traditional business loans. After filling out a brief application form, you’ll then invite your friends and family to lend to your business. Think of it as a referral. Then you’ll have 30 days to raise funds on the Kiva platform, followed by up to 36 months to repay the loan. One benefit that comes with borrowing through Kiva is that your lenders could also become customers.

Grameen America

Grameen America has invested over $2 billion with over 138,000 female business owners. The organization is also addressing the even greater financing gap faced by minority women business owners. It has launched an initiative to invest $1.3 billion in loans to Black women entrepreneurs over the next 10 years. Grameen focuses on women business owners living below the federal poverty line. The average loan size is $4,500. Microloans are also reported to Experian to help build credit as well. The process for applying for a Grameen America microloan is different from online lenders. You start off in a small group of women and together take a financial training program. After that, you’re eligible to receive a microloan as you continue to network and learn during weekly meetings.

LiftFund

LiftFund offers a range of small business loans, including microloans and SBA loans. It’s available in the following states: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Missouri, Mississippi, New York, New Mexico, Oklahoma, South Carolina, Tennessee, and Texas.In order to be eligible to apply, you must be at least 21 years old. Additionally, your business cannot be in the adult entertainment industry and you cannot have an active bankruptcy. LiftFund also provides support resources for borrowers, including a digital library of resources to help you learn new skills like marketing, finance, and management.

How to find microloans for women-owned businesses

There are plenty of online microloans for women business owners to explore. There are several types to choose from.

  • Peer-to-peer microlenders like Kiva require some hustle in order to raise funds for a microloan.
  • SBA microloans are backed by the federal government but originated through third-party lenders.
  • Nonprofit microlenders vary in how they handle loan applications. Some offer online applications while others require in-person training and support.

Microloans for women: Eligibility and requirements

Each lender has its own eligibility requirements for approval. You’ll likely need to own a portion of your business and may also need to meet requirements for how long you’ve been in business. While credit qualifications may vary, lenders typically require that you have no recent bankruptcies, foreclosures, or tax liens. Many lenders may also want to see a clearly defined business plan. Check for eligibility requirements as part of your search for small business microloans for women to save yourself time and improve your chances of success.

How can I use a microloan for a woman-owned small business?

Allowable microloan uses may vary by lender. The SBA program, for instance, allows the money to be used for things like working capital, inventory, and equipment. Peer-to-peer lenders, however, may require you to outline for potential investors how you plan to use the funds. Either way, for your own sake, it’s a good idea to have a clear plan for how you plan to use the funds and what results you expect to achieve because of the microloan. That way you may be more likely to use the funds to achieve your goals.

How to apply for a microloan

Getting pre-approved is a great way to shop around and compare small business loan rates. But you do need to be sure that the lender isn’t performing a hard credit check each time. This can damage your credit score. Instead, only submit forms that perform a soft pull on your credit score. While you’re shopping around, it can also be a good time to gather financial documentation for your business, which you’ll likely need to submit with your application. Once you find a microloan offer you’re happy with, you’ll finish the application process with the lender. Many microlenders offer an online application. You may even be able to submit a simple form and check your loan offer, including rates, terms, and monthly payment amount.

Additional resources for women-owned small businesses

There are a number of resources available to support women business owners. Nonprofit organizations like the National Women’s Business Council and the U.S. Women’s Chamber of Commerce are good starting points. You can also explore local and online support groups in your industry. It’s a great way to network, learn from other women’s experiences, and even find new clients. These resources may also help you identify small business grants for women and other types of financing, like sole proprietor loans.

The takeaway

Women-owned small business microloans can help take your company to the next level.

 

This article originally appeared on LanternCredit.com and was syndicated by MediaFeed.org

 

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10 tips for investing long-term

 

When it comes to big goals like college tuition and retirement, long-term investing is your friend. Yet, the market can be an uncertain place, and it can be useful to have some guidance to help you navigate it. Consider these 10 tips to help you pursue your long-term goals.

Related: What is considered a good return on investment?

 

DepositPhotos.com

 

What your goals are will largely determine whether or not long-term investing is the right choice for you. So you might want to spend time outlining what you want to achieve — which may depend on your life stage — and how much money you’ll need to achieve it.

Once you’ve done that, you can think about your time horizon — when you’ll need the cash — which can help you determine what types of investments are better suited to your overall goals. Investing in the stock market is generally a long-term proposition, which may not always be appropriate for shorter-term goals.

For example, if you are saving to buy a car in just a couple years, you may consider setting aside money in a savings account or money market accounts, which are stable and can provide relatively quick access to your cash.

If you were to invest the same money in the stock market, you are subject to greater market risk, meaning markets could be down when you need to pull out your cash. The short timeframe of your goal allows little time to recover from a downswing.

Stock market investing can be more appropriate for big goals in the distant future, such as saving for a child’s education or your own retirement, which could be 20 or 30 years down the line. This relatively long time horizon not only gives your investments a chance to grow, but it means that you also have the time to ride out market downturns that may occur along the way.

 

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Your risk tolerance is essentially a measure of your ability to stomach weak markets. It can help you determine the mix of investments that you will hold in your investment accounts.

Your goals and time horizon will play a part in determining your risk tolerance, as will your personal level of comfort. Longer time horizons typically mean that you can have a higher risk tolerance, which in turn means you might be more inclined to hold a greater proportion of stocks inside your portfolio.

This goes back to the idea that the longer you have to stay invested, the longer you have to recover should markets take a dive.

A shorter time horizon means you may prefer to hold a greater proportion of less risky assets like bonds or cash and cash equivalents. These tend to be less volatile, so if the market drops, they are unlikely to drop with it.

Setting your risk tolerance also means knowing yourself. If you’re somebody who will be kept up at night when the market takes a downward turn, even if your goal is still 20 years away, then you may not want a portfolio that’s aggressively allocated to stocks.

On the other hand, if stock market volatility doesn’t bother you, an aggressive allocation may be the best fit to help you achieve your long-term goals.

 

 

Olivier Le Moal / istockphoto

 

Understanding your goals, time horizon and your risk tolerance can help give you an idea of what mix of assets — generally stocks, bonds and cash equivalents—you may want to hold in your portfolio. For example, a portfolio might hold 70% stocks, 30% bonds and no cash equivalents.

As a general rule of thumb, the longer your time horizon, the more stocks you may want to hold. Stocks are the drivers of long-term growth.

As you approach your goal, you’ll likely begin to shift some of your assets into fixed-income investments like bonds. The reason for this shift? As you approach your goal — the time when you’ll need your money — you’ll likely become more vulnerable to market downturns.

For example, if the market experiences a big drop, you may be left without enough money to meet your goal. By gradually shifting your money to bonds you can help protect it from stock market swings, so by the time you need your cash, you have a more stable source of income to draw upon.

 

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A key factor of any investing is portfolio diversification — the idea that holding many different types of assets reduces risk inside your portfolio in the long and short term. Imagine briefly that your portfolio consists of stock from only one company.

If that stock drops, your whole portfolio drops. However, if your portfolio contains stocks from 100 different companies, if one company does poorly, the effect on the rest of your portfolio will be relatively small.

A diverse portfolio contains many different asset classes, such as stocks, bonds and cash equivalents as mentioned above. And within those asset classes a diverse portfolio holds many different types of assets across size, geographies and sectors, for example.

The basic principle behind diversification is that assets in a diverse portfolio are not perfectly correlated. In other words, they react differently to different market conditions.

Domestic stocks for example, might react differently than European stocks should US markets start to struggle. Or energy sector stocks will react differently than technology stocks. So, if oil prices drop, energy sector stocks might take a hit, while tech might be less affected.

Many investors may choose to add diversity to their portfolios by using mutual fundsindex funds and exchange-traded funds, which themselves hold diverse baskets of assets.

 

DepositPhotos.com

 

This tip may seem like a no-brainer, but there are very good reasons to start investing as early as you can for long-term goals. First, this can give yourself time to ride out market volatility, as mentioned above.

Increasing your time horizon gives you the opportunity to invest in riskier investments, like stocks, for longer. Though risky, stocks typically offer higher earning potential than other types of investments, such as bonds.
Consider that since it’s beginning in 1926 through 2018, the S&P 500 has had an average annual return of about 10% per year.

Second, the sooner you start investing, the sooner you are able to take advantage of compounding interest, one of the most powerful tools in your investing toolkit. Compound interest is essentially the interest you earn on your interest.

The idea here is that as you reinvest your returns, you are increasing the amount of money on which you earn on returns. As a result, your returns keep getting bigger and your investments can start to grow exponentially.

 

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Investing is just numbers and math, so it’s totally rational, right? Well…not exactly. Humans are emotional creatures and sometimes those emotions can get the better of us, leading us to make decisions that aren’t always in our best interest. Letting emotions dictate our investing behavior can result in costly mistakes.

For example, if the stock market starts to drop, you may panic and be tempted to sell your stocks. However, doing so can actually lock in your losses and means that you miss the subsequent rally.

On the other end of the spectrum, when the stock market is roaring, you may be tempted to jump on the bandwagon and overbuy stocks. Yet, doing so opens you up to the risk that you are jumping on a bubble that may soon burst.

There are a number of strategies that can help these mistakes be avoided. First, fight the urge to check how your stocks are doing all the time. There are natural cycles of ups and downs that can happen even on a daily basis. These can cause anxiety if you pay attention too closely. You might want to avoid constant checking in and instead keep your eye on the big picture — achieving your long-term goals.

Trust your asset allocation. Remember that it has already taken your goals, time horizon and your risk tolerance into consideration. Tinkering with it based on spur-of-the-moment decisions can throw off your allocation and make it difficult to achieve your goals.

 

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Be wary of taxes and fees as these can take a hefty bite out of your potential earnings. Mutual funds are a common, actively managed tool for investing. To cover the cost of management, mutual funds may charge an expense ratio — a percentage based on the total assets invested in the fund each year.

The expense ratio is deducted directly from your returns. So, if the mutual fund earns 7% in a given year, and the expense ratio is 1%, your actual earnings are only 6%.

You may also encounter annual fees and custodian fees. Annual fees can be as high as $90 per year. Custodian fees — usually charged by retirement accounts to cover reporting costs — can be as high as $50 each year.
You can also be charged fees for buying and selling assets as well as commissions that are paid to brokers for their services.

It’s important to manage these costs, as they can eat away at your ability to save over time. One of the best lines of defense is doing your research to understand what fees you will be charged and what your alternatives are.

For example, you may want to choose mutual funds with the lowest expense ratios, or you may consider passively managed index funds that charge very low fees. Selling stocks can expose you to short-term or long-term capital gains tax. Short-term capital gains tax — which is equal to your income tax rate — is owed when a stock is sold after being owned for a year or less.

Long-term capital gains tax — equal to 0%, 15% or 20%, depending on the tax bracket — is owed on assets that are sold after they’ve been held for a year or more. Limiting how often stocks are sold may limit the amount of capital gains tax owed.

 

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There are a few long-term goals that the government wants you to save for, including higher education and retirement. As a result, the government offers special tax-advantaged accounts to help you achieve these goals. A 529 savings plan can help you save for your child’s — or anyone’s — college or grad school tuition.

Contributions can be made to these accounts with after-tax dollars. This money can be invested inside the account where it grows tax-free. You can then make tax-free withdrawals to cover your child’s qualified education expenses.

Your employer may offer you a 401(k) account through your job. These accounts allow pre-tax dollars to be contributed, which lower your taxable income and can grow tax-deferred inside the account.

If your employer offers matching funds, you could try to contribute enough to receive the maximum match. When you withdraw money from your 401(k) at age 59 ½, it is subject to income tax.

You may also take advantage of traditional IRAs and Roth IRAs. Traditional IRAs use pre-tax dollars and allow tax-deferred growth inside your account. Withdrawals at age 59 ½ are subject to income tax.

You fund Roth IRAs, on the other hand, with after-tax dollars, so money in your account grows tax-free, and withdrawals are not subject to income tax. IRAs provide more flexibility in terms of investment options than a 401(k).

Usually, 401(k)s offer limited investment options through your employers, whereas you can hold diverse investments from stocks and bonds to real estate inside an IRA.

 

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One way to continually add to your investments is by making saving a regular activity. One easy way to do this is through automation. If you have a workplace retirement account, you can usually automate contributions through your employer.

Or, if you’re saving in a brokerage account, you can arrange with your broker for a fixed amount of money to be transferred to your brokerage account each month and invested according to your predetermined allocation.

Automation can take the burden off of you to remember to invest. And with the money automatically flowing from your bank account to your investment accounts, you probably won’t be as tempted to spend it on other things.

 

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You may want to periodically check in on your portfolio to make sure your asset allocation is still on track. If it’s not, it may be time to rebalance your portfolio. You may want to rebalance when the proportion of any particular asset shifts by 5% or more.

This could occur, for example, if the stock market does really well over a given period, upping the portion of your portfolio taken up by stocks.

If this is the case, you might consider selling some stocks and purchasing bonds to bring your portfolio back in line with your goals. Periodic check-ins can also provide opportunities to examine fees and other costs and their impact on your portfolio.

 

DepositPhotos.com

 

When you’re ready to invest, whether through retirement accounts, brokerage accounts, by yourself or with help, these strategies can help you build an investment plan to match your financial situation.

This plan accounts for your individual needs and your unique investment style, and sticking to it can help you achieve your long-term objectives.

Learn more:

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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