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5 Financing Strategies for Female-Owned Businesses

When it comes to entrepreneurship in Canada, women are the main drivers. However, data from the Business Development Bank of Canada (BDC) revealed that small and medium-sized businesses (SMBs) owned by women earn less than half the revenue as comparable companies run by men. A lack of cash flow is the number one reason small businesses fail, so it’s critical to have a solid strategy for managing money, especially as many businesses continue recovering from the pandemic.

Female-owned SMBs are also more likely to be self-funded than those run by men. According to Fundera, only a quarter of women-run businesses apply for financing, and when they do, they ask for about $35,000 less than their male counterparts. A 2019 report from Visa found that 31 per cent of women found it difficult to raise funds when they were starting their businesses. Here are some financing strategies and tips for women-owned businesses.

Know Where to Look

There are tons of financing options available for entrepreneurs, and the key to accessing funding is finding the right opportunities. Financing opportunities are usually categorized by the size of the business, the development stage the business is in or the time for which it has been operational, the industry it’s in, its location, and the identity of the owners (e.g. Black, LGBTQ+). Look for financing opportunities where you meet a majority of the criteria for the best results. The Canadian government even offers a Business Benefits Finder tool on their website that business owners and entrepreneurs can use to find the loans best suited to their business profile.

There are also resources catered specifically for female-led businesses. GrantsForWomen.org provides women from multiple industries — including non-profits — resources like grants, fellowships and funding networks, as well as access to venture capitalists. The website MileIQ has a comprehensive blog post listing small business loans and grants for Canadian women. Some examples of grants and loan opportunities solely for women include the Cartier Women’s Initiative Award, Open Meadows Foundation Grant, and the Amber Grant.

Know Your Business Inside Out

Many financing applications require business owners to give detailed explanations of their businesses or what they plan to do with the funding for which they’re applying. To increase the chances of receiving funding, it’s important to know these details intimately. If you have a business plan or a business document, it’s a good idea to review these documents and use them to help you answer application questions.

It can also be helpful to interview founders, staff, and customers to flush out answers to questions about the business’s origin, its plans for the funding, and the value it brings. The objective here is to get an understanding of your business from the people who know it best. You can build on common themes in people’s responses and apply them to the application questions. Due to the detail-oriented nature of funding applications and the fiercely competitive environment of funding rounds, it may also help to hire a grant writer. Grant writers are experts in the specific ways in which applications need to be worded and structured, and they can help translate your information effectively.

Microbusinesses and Microloans

Women entrepreneurs are more likely to have businesses in the services, health and beauty, food or social industries. Women are also more likely to have specialized, service-oriented businesses which employ fewer than 10 people. These are known as microbusinesses or microenterprises. Microbusinesses typically get small loans of less than $50,000 from banks or other organizations to launch. These loans are fittingly called microloans. Microloans are ideal for women because their businesses usually begin as solo endeavours or hobbies. Women typically use the money from microloans to purchase equipment they need to start their businesses, increase production capacity, or purchase inventory.

Searching for financing exclusively for microbusinesses can increase your chances of receiving funding because it shrinks the field of competition. Alternatively, microloans may not provide sufficient funding for large corporations, but they can be perfect for boutique businesses. Access to funding is critical for microbusinesses, considering that it is these businesses that have been worst affected by the pandemic. Microbusinesses tend to be newer as well, making it difficult for most to qualify for governmental financial assistance.

Find Female Investors

Data from the National Angel Capital Organization (NACO) suggests that women are more likely to invest in women-founded businesses than men. This is significant considering that women only receive 10 per cent of venture capital in Canada. So, to increase your chances of receiving funding, seek financing from women investors. This will require you to do some research though, as only 15.5 per cent of SMBs in Canada are owned by women. You can also seek out women who are members of Canadian angel investor groups, which, as of 2018, is 17 per cent. 

Increased investment in female entrepreneurs not only helps their businesses succeed, but also creates a positive cyclical effect. More investment into female-led businesses leads to greater visibility and better chances of success. In turn, that can inspire more female entrepreneurs to seek funding or inspire more women to get into business. It can also encourage male investors and financial institutions to back female-led businesses.

Programs for Women

There are several programs dedicated to supporting female-led businesses that provide funding and other resources. The Royal Bank of Canada (RBC) developed several programs and resources to meet the need of women entrepreneurs. In one of their programs, a small group of entrepreneurs go through themed sessions and get assistance and information on everything from starting a business to planning for retirement. RBC also provides one-on-one strategic advising.

The Women Entrepreneurship Strategy provides business owners with access to funding and mentorship opportunities. The Scotiabank Women Initiative offers entrepreneurs a comprehensive program to help them elevate their business through access to funding, mentorship, and education. Also, keep your eyes open for other programs, business incubators, business pitch competitions, and accelerators designed specifically for women entrepreneurs. 

Marcus Medford | Contributing Writer

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