3 funding factors women entrepreneurs looking to pass $100,000 in income need to know before applying for a loan or credit

Arielle Loren 100K Incubator Founder

  • Debt financing is an accessible method of funding for
    many small businesses, but there are also risks to consider before
    applying for credit or loans. 
  • That’s why Harvard alumna and funding expert Arielle
    Loren advises entrepreneurs to keep their jobs as backup income
    when they’re first starting their businesses. 
  • Most importantly, Loren says, don’t take out more than
    you’re comfortable repaying. 

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There’s a reason Arielle Loren named her business-funding app
100K Incubator — and it’s a reason that’s all too familiar to
American business owners. 

According to
Fundera
, 86.3% of small business owners make less than $100,000
a year in income. For many entrepreneurs,
getting capital
is the biggest obstacle to hitting that $100K
mark.

Loren, a Harvard alumna and business strategist, is trying to
make that number more reachable — specifically for women and
women of color, who combined only get
2.2% of venture capital
in the US. This is a stat she knows
well, as she’s experienced the struggle to get capital
firsthand. 

“I remember what it was like being an early stage entrepreneur,
not making six figures, and struggling to figure out what my
funding options were,” Loren told Business Insider. And she found
most women entrepreneurs in the early stages of their businesses
experienced the same issues.

“It was either you were going after an investor, or you were
stuck with a cash-only business where you were limited to
reinvesting your business’ profits to scale,” she said.

Loren spent a decade in consulting and fundraising, and she ran
a marketing and business-development agency for five years. Then,
she decided to use her knowledge and experience to help other
women. She started the business-funding education app for women,
100K Incubator, with
the goal of getting 100,000 women entrepreneurs to reach $100,000
in annual sales. Since launching in 2018, the app has helped 1,000
women access over $1 million in total capital. 

However, venture capital isn’t the only option for funding. Part
of Loren’s app includes a 50-course online bootcamp, while one
module explains the
12 different types of funding
available to small business
owners. The first options she teaches to entrepreneurs in their
earliest stages are business credit cards, personal loans, and home
equity loans and lines of credit.  

These three options fall under debt financing, which is more
accessible than equity financing, but do present risks. Some loans
can take up to 30 years to pay off, and any missed payments could
put a gash in your credit score and ruin your chances of securing
funding later on. 

That’s why Loren advises entrepreneurs to keep their jobs when
they’re first starting out, not only to pay their personal
expenses, but to have backup income. “The most important thing is
to never take out funding that you’re not comfortable repaying on
the repayment term,” Loren told Business Insider.

There are some important factors to consider before you apply
for a loan or
credit, to make sure you’re not borrowing more money than you can
pay back. 

Interest rate

Plans are going to vary from bank to bank, but interest rates
can also depend on your credit history. The lower your credit
score, the higher your interest rate is likely to be. Factor this
into the total amount you’re borrowing — a few thousand dollars
can easily accumulate, even if you’re making your minimum
repayments on time. 

Repayment term

You’ll also need to think about the length of time you agree
upon for repayment. Some loans only take a few months or a couple
years to pay back. Others could take 20 to 30 years, so be sure
you’re able to make that commitment. 

If you want to repay your loan in less time than your agreed
term, you could be charged fees for early repayment. Consider
whether that’s an additional fee you’re willing to pay —
otherwise, you may be locked into debt repayment for the full term
of your loan.

Borrowing from friends and family

Loren said that these factors apply just the same if you’re
borrowing money or getting investments from friends and family.
“Business is still business regardless of whether it’s family or
not,” she said. 

If you’re confident you can effectively mix personal
relationships into your business, Loren suggests treating them just
like business partnerships. Pay back your debt on time and keep
them updated on how your business is doing. 

“If you do default on a payment or you do lose them money, is
the impact going to be so severe that you lose out on that
relationship?” Loren said. 

From starting your business to expanding after several years,
debt financing is easier to access than equity or venture funding.
If you repay your debt on time, it can also help you improve your
credit history to apply for more capital in the future. 

SEE ALSO: Successful
founders match their funding to their revenue. Here are 12 options
to consider, from early days to venture.

SEE ALSO: A
Mastercard exec gives 6 signals she looks for in a killer business
pitch and the questions she asks that often catch entrepreneurs off
guard


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3 funding factors women entrepreneurs looking to pass 0,000 in income need to know before applying for a loan or credit