Small business loan programs for women

By Carol Taylor, CPA/FPS, and Fritz Wood, CPA/CFP, personal finance editor

Q. I?m a female practitioner, and I want to borrow about $250,000 to start a practice. Do I qualify for any special small-business loan programs for women?

A. If you?re looking for a small-business loan, we recommend you start with your bank or a lender who specializes in financing veterinary practices. But if your bank already turned you down, the government offers a number of special loan programs. For example, the Women?s Prequalification Loan Program allows female business owners to prequalify for Small Business Administration (SBA) loan guaranties before they apply for loans. To be eligible, the small business must be at least 51 percent owned, operated, and managed by women; report annual sales less than $5 million; and employ fewer than 100 people. The program emphasizes the borrower?s character, work experience, credit history, and projected cash flow, and doesn?t focus heavily on the borrower?s equity and collateral. Borrowers qualify for loans of up to $250,000, and they can use proceeds to finance working capital, equipment, and real estate.

The SBA provides banks with guaranties of as much as 80 percent on loans up to $100,000 and as much as 75 percent on loans between $100,000 and $250,000. While the borrower negotiates the interest rate with the bank, the rate can?t exceed the prime rate plus 2.25 percent for loans that carry a term of less than seven years, and prime plus 2.75 percent for loans of seven or more years. The SBA also collects a 2 percent guaranty fee when the guaranteed portion is $80,000 or less, or a 3 percent guaranty fee when the guaranteed portion is more than $80,000.

For more information, visit www.sba.gov.

November 2001 Veterinary Economics