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As a businesswoman, you probably know that access to capital remains a major challenge facing your company.
Studies have shown that businesswomen are more cautious than men when it comes to financing their business; in fact, they are less inclined to turn to a financial institution. They take on less debt and are more likely to use their personal savings to start their business or their own capital to run it. However, because their businesses are often small, businesswomen also have more limited financial needs.
Other studies show that women operate more service and retail establishments than men, which might explain their difficulty in getting financing since financial institutions often consider these two sectors more risky. However, although women are generally less inclined than men to apply for financing, when they do, they are more likely to get it. According to a study by Industry Canada on SME financing in Canada, in 2000 majority female-owned SMEs obtained a loan approval rate of 82%, which is slightly higher than the approval rate for majority male-owned businesses (80%). This suggests that when they do apply for financing, businesswomen submit excellent applications.
The most important thing for entrepreneurs – men and women – wishing to apply for financing for their business is to learn the best approach. Following are a few ideas that could enhance your chances of getting financing.
A few tips to increase your chances of getting financing
- Show what you can do: Before you present your business plan to your financial institution, make sure that you present your own background so that they may get to know you. Your banker will be better able to evaluate your skills, experience and ability to complete your project. It might be useful to meet with your banker and present your resume.
- Be realistic: It is not true that if you ask for a lot, you are bound to get at least a little. An accurate assessment of your financial needs shows that you are serious and have good management capabilities.
- Develop a business plan: To show your banker that you have done a serious analysis and a thorough plan of your project. This plan must be clear and concise. It must describe the target market and present a competent assessment of the investment needs. For more information on what is essential in a business plan, check out BDC's sample business plan.
- Maintain a good personal solvency index: Your banker will look at your credit history to see if you can meet your financial obligations. NSF cheques and unpaid bills could reduce your chances of getting financing for your business.
- Make a personal investment in your business: This can mean injecting capital or providing assets as security. This investment shows your commitment and your confidence in your project.
- Don't hesitate to question your banker: If your application for financing is refused, don't hesitate to ask questions so that you understand why it was refused. This will help you prepare better next time you apply. It might also direct you to other types of financing better suited to your needs.
How BDC can help
BDC offers flexible financing tailored to your business projects, at every stage of your company's development cycle.
For technology-based businesses with high growth potential that are positioned to become dominant players in their markets, BDC also offers venture capital.
Finally, BDC's subordinate financing is a hybrid product that brings together some features of both debt financing and equity financing.
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