Financial Strategies for Women-Owned Small Businesses

The Wells Fargo 2024 Impact of Women-Owned Businesses Report finds that women-owned businesses make up 39.1% of all businesses in the U.S.—a 13.6% increase in the last 5 years. While this growth is encouraging, digging deeper reveals disparities that should not be overlooked. For example, QuickBooks survey revealed that 57% of women who use credit cards in their business have used their credit cards for emergency purchases in the last year, with one in ten reporting that they did so on a monthly basis. Moreover, only half of the respondents believed that they will be able to pay off their credit cards without paying interest.

These financial statistics paint a more nuanced picture of the growth that has occurred for women-owned businesses, revealing that while there are more female business owners today, much of the growth has been in microenterprises, and many of these entrepreneurs may not be aware of the financing options available that could help them grow their businesses proactively. As a result, they are relying on credit cards and paying high interest rates that may hinder their growth.

In this article, we’ll present some strategies that can help women-owned small businesses manage their finances proactively to encourage growth and reduce a reliance on expensive credit card debt.

Financial Strategies for Women-Owned Businesses

1. Build a Solid Financial Foundation

Every business needs a solid financial foundation. This means having a well-organized accounting system and a realistic budget. Nothing derails a business faster than finding out after the fact that your expenses were higher and your sales lower than expected–something you could have avoided if your accounting was up to date.

2. Separate Personal and Business Finances

One of the common pitfalls for small business owners is mixing personal and business finances.

Open a separate business bank account and credit card to track business transactions accurately. This separation not only simplifies record-keeping but also ensures compliance with tax regulations. Plus, it provides a clearer picture of your business’s profitability and financial standing.

3. Create a Solid Business Plan

You’ve probably heard this advice countless times, but its importance cannot be overstated. A well-crafted business plan helps you understand your goals, target market, competition, and financial projections.

This way, it’s easier to communicate your vision to potential investors, partners, and employees. Additionally, having a business plan prepared in advance positions you as a serious entrepreneur when applying for grants and loans.

4. Keep Your Books and Numbers Up to Date

Understanding your business’s financial health is non-negotiable as a business owner. All too often, small business owners get their accounting software set up early on, but don’t really understand what the numbers mean, or get too busy and forget to pay attention to them.

Do you know your monthly revenue, expenses, and profit margins? Regularly reviewing your financial statements gives you insights into your business’s financial performance and can help you make data-driven decisions. You may consider hiring a professional accountant to ensure accuracy in your financial records and keep you in the loop.

5. Build a Strong Credit Profile

Establishing and maintaining a strong credit profile is essential for accessing financing and favorable terms. To create a positive credit history, prioritize timely payments to suppliers and creditors, responsible use of credit, and prompt resolution of any discrepancies.

A great credit profile not only enhances your eligibility for financing but also positions your business as a reliable and trustworthy partner. It can also be a valuable asset when seeking business funding for expansion or addressing unforeseen challenges.

6. Implement Efficient Cash Flow Management

Cash flow is the lifeblood of any business, and managing it effectively is key to survival. Women-owned small businesses can benefit greatly from implementing efficient cash flow management strategies.

Build your business to send invoices promptly, offer your customers discounts for early payments, and negotiate favorable payment terms with suppliers. If you do, you can position your company to cover operational expenses and seize growth opportunities as they arise.

7. Explore Funding Options for Women Entrepreneurs

Many organizations, including the SBA, the Association of Women Business Owners (AWBC), Moms as Entrepreneurs, and the National Association of Women Business Owners (NAWBO), offer special support programs, grant opportunities, mentorship, and networking opportunities.

Research and identify programs that align with your business goals and apply for the resources available to you. Take advantage of these opportunities — grants, financing, or venture capital programs — to secure additional capital for your business.

Empowering Women Entrepreneurs Financially

In today’s entrepreneurship space, women-owned small businesses have the potential to achieve remarkable success. But this success only comes with putting in the work. There are no shortcuts.

Sarita Ekya knows this through experience. As the owner of S’MAC, a mac and cheese restaurant chain in New York City with three locations, she’s faced many challenges over the years—including the severe disruption that happened to the food industry during the pandemic. A long-time Biz2Credit customer, when COVID-19 restrictions threatened to close their doors, she had the finances she needed to innovate and make it through.

As you grow and implement the right financial strategies for your business, be sure to check out the financial solutions Biz2Credit offers. Whether your goal is short-term growth, long-term sustainability, or simply taking advantage of an opportunity to expand, the right financing can help you get there.

FAQs

Do female-owned businesses get tax breaks?

You may qualify for specific tax deductions and credits as a female-owned business. One key benefit is the Small Business Health Care Tax Credit, which supports employers who provide health insurance for their employees.

What are the SBA programs for women?

The Office of Women's Business Ownership (OWBO) supports women entrepreneurs through programs offered by SBA district offices. These programs provide business training, counseling, federal contracting opportunities, and access to credit and capital. Additionally, the OWBO oversees Women's Business Centers (WBCs), which offer specialized resources to help women succeed in business.

What is the best source of finance for a small business?

The U.S. Small Business Administration (SBA) is a trusted and widely used funding source for small businesses. SBA loans, particularly the 7(a) loan, offer entrepreneurs lower interest rates and extended repayment terms, making them an attractive option for business financing.

What is the most important financial resource for a small business owner?

The two primary sources of business financing are debt and equity. Additionally, government grants may be available to support specific business initiatives. Incentives can also be offered to establish businesses in particular communities or promote growth in targeted industries.

Which business is most profitable for a housewife?

Homemakers looking to start a profitable business have several great opportunities to explore. A home-based food business allows them to turn culinary skills into a source of income, while a home decor business can cater to those with a creative flair. Online tutoring and freelance writing provide flexible work-from-home options, as does working as a virtual assistant. Online reselling and blogging offer additional ways to generate income through e-commerce and content creation. Starting a boutique can be a rewarding venture for those interested in fashion.

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