Women entrepreneurs are making significant strides in the business world, but securing the necessary financing can often be a challenge. By understanding and addressing common obstacles, women can confidently navigate the loan application process and unlock the potential of their ventures.
Read on to learn about the common problems Indian women entrepreneurs have with getting business loans, why increasing their access to funding is essential, and how financial institutions are now designing unique loan products to serve this underserved segment better
Top 5 Challenges Faced by Women Entrepreneurs for Business Loans
When women who start their businesses try to get loans, they often encounter obstacles from those who lend money. Common issues for business loans happen for a few main reasons:
1. Limited Credit History
Many Indian women, especially those from traditional backgrounds, may not have a substantial credit history. This is often due to financial accounts being primarily in the name of male family members. Without a strong credit history, financial institutions may view women applicants as higher risk, making it more challenging to secure loans or resulting in higher interest rates.
2. Lack of Collateral
Business loans often require collateral, which can be a significant hurdle for women entrepreneurs. In many Indian families, property and assets are typically registered in the name of male members, leaving women with limited options for collateral. This can result in loan rejections or less favourable terms.
3. Gender Bias and Stereotypes
Despite progress, gender bias still exists in the Indian financial sector. Some financial institutions may hold preconceived notions about women's business understanding or commitment to their ventures, leading to unfair assessments of loan applications. This bias can manifest subtly, such as more rigorous questioning or demands for additional guarantors.
4. Balancing Family Responsibilities
In Indian society, women are often primarily responsible for household duties and childcare. This dual role can lead to time constraints, causing some financial institutions to question a woman's ability to dedicate sufficient time to her business.
5. Limited Awareness of Government Schemes
The Indian government has introduced several schemes to support women entrepreneurs, such as the Mudra Yojana and the Stand-Up India scheme. However, many women, especially in smaller towns and rural areas, may not be aware of these initiatives or how to access them, missing out on potentially beneficial financial support.
Different Types of Business Loans for Women
Many banks and financial companies have specific products designed to help women with their businesses. Some of the popular options include:
1. SME Loans For Women
- Offered to existing businesses in manufacturing, services or trading sectors
- Sanctioned purely on business credentials and cash flows
- Unsecured loans available; no mandatory collateral
- Special concessions on interest rates
2. Loans against Securities/FDs
- Ideal for homemakers planning to start new ventures
- Availed against investments in shares, MFs, insurance plans, etc.
- Repayment is linked to the maturity proceeds of the assets pledged.
3. Women Entrepreneur Loans
- Specifically positioned by banks for women starting new businesses
- Flexible collateral and repayment terms
- Concessional pricing and access to mentors/training
4. Stand Up India Loans
- Backed by the Government for funding SC/ST and women entrepreneurs
- New startups eligible for loans of 10 lakh to 1 crore
- Relaxed eligibility norms and customised repayment schedule
Conclusion
Women entrepreneurs still need more support in getting loans and funding. Banks and other lending institutions can help by creating unique loan options for women and fixing unfair rules. Having the same opportunities for women in every state is also essential. These changes can help women entrepreneurs succeed and boost the economy.
FAQs
1. What are the challenges women face in acquiring business loans?
Women entrepreneurs often face bias in getting business loans. This bias can range from stringent due diligence, as they have a limited credit history, to higher interest rates due to a lack of assets for collateral and sceptical attitudes about women-led ventures.
2. What are the disadvantages of women in business?
The critical disadvantages faced by women entrepreneurs include having to juggle between family duties along with their ventures, unlike male counterparts, safety concerns due to odd working hours, limited funding avenues, thereby posing financial constraints, and an entrenched patriarchal mindset that doubts their capabilities.
3. Why is increasing access to business loans important for women entrepreneurs?
Enabling more access to institutional credit for women-led businesses can boost productivity, sales, workforce participation, and overall economic growth.
4. What type of loan can women get without collateral?
Women can apply for personal loans or business loans from government schemes without collateral.
