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Where Very Small Businesses Dominate

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Though it may seem like giant corporations like Amazon command the U.S. business landscape, small businesses continue to be the backbone of most local economies.

The U.S. Small Business Administration estimates that 99.9% of ventures, or 30.7 million companies, qualify as small businesses. However, the SBA’s definition of a small business is broad. To qualify, businesses must meet or fall below the maximum revenue and employee count that the SBA sets for each industry. Revenue limits span $750,000 to $38.5 million, while employee requirements range between 100 and 1,500 people.

But the vast majority of small businesses are much smaller — 89% have 20 or fewer employees. For this study, MagnifyMoney researchers only considered businesses with fewer than 10 paid employees, firms that may include younger companies and mom-and-pop operations with slim resources.

Researchers found that these extremely small companies come close to matching — and in one case exceeding — average payrolls of all businesses in their cities. We ranked the 50 largest U.S. metros by payroll relative to metro averages, growth among companies with fewer than 10 employees and the percentage of workers employed by these firms to see where they dominate.

Key Findings

  • Miami comes out on top with a large and growing number of small businesses: 84% of businesses here have fewer than 10 employees with 15% of the city’s total workforce employed by these extremely small companies.
  • Los Angeles takes second place, also with a large number of small-scale businesses, but what’s striking about these companies is that their payroll is 94% of the metro average, second only to Las Vegas where companies with fewer than 10 employees actually exceed the average payroll.
  • Louisville, Ky. is at the bottom of the list — just 7% of all workers are employed by companies with fewer than 10 employees. Additionally, the number of such small businesses in Louisville is dropping, which could be a bad sign for those still operating in the area.
  • Memphis, Tenn. comes in one spot above Louisville, Ky. This metro area had the lowest share of extremely small businesses on our list, as well as one of the lowest shares of all metro workers employed by these companies.
  • The average small business rate is 72% among all cities. In other words, roughly three quarters of businesses in the 50 largest metro areas have less than 10 employees on the payroll.
  • Generally, payroll per employee at these small businesses tends to be lower than the metro average. On average across all 50 metros, payroll per worker at companies with fewer than 10 employees is 79% of the metro average.

Metro areas where very small businesses dominate

Small businesses support the local economy in these high-ranking metros.

1. Miami

The South Florida city boasts the highest percentage of businesses with fewer than 10 employees as well as the largest percentage of its workforce employed at such companies, despite a relatively small business rate increase in one year’s time, just a 0.2% change. Average payroll per employee is 86% of the relative metro average.

The economic development council in Miami-Dade County identifies and promotes industries that are poised for job and wage growth including aviation, banking and finance, creative design, hospitality and tourism, technology, life sciences and health care, and trade and logistics. Tourism has long been a lucrative sector for Miami. Small businesses in the industry can promote their services at the City of Miami Beach Visitors Center, which has more than 120,000 annual visitors.

2. Los Angeles

Los Angeles holds the No. 2 spot thanks to a strong average payroll, second only to Las Vegas among extremely small businesses. Business rate growth was flat in one year’s time but 12% of LA’s workforce is employed by small businesses with fewer than 10 employees.

Entertainment is unsurprisingly among the top industries in Los Angeles, alongside aerospace, bioscience, transportation and fashion. The City of Los Angeles offers several resources and incentives to support small businesses, such as the Restaurant and Hospitality Express Program, which streamlines the permit approval process for food service establishments. The cyber threat protection program also helps small business owners learn best practices to prevent cyber attacks or breaches.

3. Tampa, Fla.

Another Florida metro rounds out the top three. Though it tops No. 2 Los Angeles by small business rate, Tampa has lower employment numbers: 11% of its workforce is employed by a small business with fewer than 10 employees. The average payroll of those companies is 81% of the metro average. Tampa has seen a 0.1% one-year change in the small business rate.

The metro area’s key industries include financial and professional services, manufacturing, distribution and logistics, life sciences and health care, information technology and defense and security. Tampa Bay is also a popular location for corporate headquarters.

Areas with a lesser impact from very small businesses

These metro areas see less economic influence from local small businesses.

48. Nashville, Tenn.

Nashville has one of the lowest small business rates in our study at 67%. Just 8% of workers in the area are employed by a small business with fewer than 10 employees, which see an average payroll per employee at 79% of the metro average. Nashville has seen a -1.0% one-year drop in its small business rate.

Nashville once had a population growth rate of nearly 100 people per day. That growth slowed this year, according to a report from The Tennessean newspaper, but the area has felt the effects of a rapid influx of new residents, including high tourism, expensive housing and displacement of low-income residents. Large retail chains like Trader Joe’s also continue opening throughout the area.

49. Memphis, Tenn.

The other Tennessee metro near the bottom of our list has a small business rate of 62%, the lowest of all metros we ranked. In Memphis, 7% of all employees work for a small business with fewer than 10 employees with average payroll per employee at 79% of the metro average. During one year’s time, Memphis had a -0.8% drop in the small business rate.

Memphis is among the poorest metropolitan areas in America, and residents face economic barriers such as high poverty as well as segregated and devalued neighborhoods. The Memphis River Parks Partnership, a nonprofit focused on transforming the area of Memphis closest to the Mississippi River, is working to support local businesses. Part of the organization’s efforts include contractor development strategies that position minority- and women-owned businesses for success.

50. Louisville, Ky.

In last place, Louisville has a 66% small business rate and a significant drop of -1.2% in growth during a one-year period, tying with Milwaukee. Just 7% of Louisville employees work for a small business with fewer than 10 employees where payroll per employee is 78% of the local average.

Louisville is working to grow its tech workforce to become an emerging technology hub. The city has invested in job programs and initiatives such as Code Louisville and Bit502, according to The Lane Report. Louisville has also partnered with educational institutions, nonprofits and local businesses to boost the city’s tech output.

Methodology

To rank the places where very small businesses dominate, we looked at data for 50 of the largest metropolitan areas. Specifically, we evaluated these four metrics:

  • Small business rate. This is the percentage of businesses with fewer than 10 employees.
  • One-year change in small business rate. This is the change from 2015 to 2016 in the small business rate.
  • Percent of workforce employed at small businesses. This is the percentage of all paid employees who work in small businesses with fewer than 10 employees.
  • Relative pay of small business employees. This is average payroll per employee of these small businesses divided by the metro area average payroll per employee.

We then ranked each metro in each of these metrics. Each metro area was scored based on the average rank received across the four areas. Data for all metrics comes from the Census Bureau’s 2016 and 2015 Survey of Entrepreneurs.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Small Business

Guide to Small Business Funding for Women

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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As the number of women-owned businesses grows across the U.S., women entrepreneurs are increasingly in need of funding for their businesses. While there aren’t specific small business loans for women, there are many lenders and organizations that offer small business help for women entrepreneurs, including SBA loans, term loans and business lines of credit, among other resources.

Small business loans for women: 3 options to consider

SBA loans

Best for: Businesses looking for long-term financing and businesses struggling to get loan approval.

The Small Business Administration (SBA) offers small business help for women that includes business training, counseling and assistance in accessing financing. The SBA can also help you if other lenders have deemed your business too risky. Since SBA loans are guaranteed by the Small Business Administration, lenders may be more likely to approve your application and even offer lower interest rates and longer repayment terms.

The SBA offers multiple loan types, with amounts ranging from $500 to $5.5 million. Requirements to qualify for each loan type are unique, and eligibility varies depending on the lender and the loan program. However, SBA loans are available for most business purposes.

Term loans

Best for: Businesses that can clearly project how much cash they’ll need or for startup capital when a business doesn’t want to forfeit any ownership to an investor.

A term loan is a typical loan arrangement that allows you to borrow a lump sum of money and pay it back in installments, with interest. Interest rates and other fees can vary greatly from one lender to the next, but you’ll likely need to present your business plan, expense sheet and financial projections in order to apply for a term loan at any bank or credit union.

Some lenders are committed to offering small business term loans to women. Learn more about these lenders and their loan product options below.

Business lines of credit

Best for: Businesses that need ongoing access to capital or that have an open-ended project.

A business line of credit is an account that allows you to draw money up to a set limit. Similar to a credit card, each time you pay down your balance you can draw up to the limit again, and fees and interest payments are based on your account balance. Unlike business credit cards, which generally have higher interest rates, business lines of credit tend to have lower interest rates and allow you to make cash withdrawals without any limitations and write checks from your account.

You can take out a business line of credit through a bank, credit union or online lender. Qualification is based on your personal credit.

5 best small business loans for women

To select the top five small business loans for women, we looked at a number of lenders and chose a mix of online and traditional bank lenders. While traditional lenders may be more difficult to qualify for, the two we have listed are among the most active SBA lenders, making them a potentially compelling option for women business owners.

Additionally, the lenders we selected had to meet the following criteria:

  • Transparent websites. These lenders clearly list necessary information on their websites so small business owners can easily find what they need.
  • Wide range of amounts and term lengths. Many of these lenders offer a range of loan products as well as amounts and term lengths, which means they can cater to a range of small business owners’ needs.
  • Lender credibility. These lenders have all been in business for at least a decade and have established themselves in the space through things like positive customer reviews and high approval counts.

1. Kabbage

Type of financing

Rate

Amount

Min. credit score

Best for...

Business line of credit

Monthly fee is 1.25% to 10.00% of principal

Up to $250,000

None

Ongoing access to capital

Although Kabbage often refers to its financing product as a loan, it is technically a line of credit, one the company says is commonly used by women business owners for inventory purchases, office expansion, marketing campaigns, equipment purchase and hiring employees. Kabbage’s monthly fees for business lines of credit start at 1.25% and are only charged based on the amount you draw.

Kabbage offers a simple online application process, and you can manage your line of credit account from a mobile device.

2. Smartbiz

Type of financing

Rate

Amount

Min. credit score

Best for...

SBA loans

5.04% to 10.29% APR

$30,000 to $5,000,000

650 for a $30,00 to $350,000 loan

675 for a $500,000 to $5 million loan

Faster processing on SBA loans

According to Smartbiz, 30% of its 7(a) SBA loans are granted to women-owned businesses. The national average is only 14% for SBA lenders.

Smartbiz helps expedite the application process by submitting your application to an online marketplace of multiple SBA lenders at once. Prequalification is available within five minutes, and funding is available in as few as seven days upon approval.

3. Wells Fargo Bank

Type of financing

Rate

Amount

Min. credit score

Best for...

Equipment Express Loan

5.50% to 9.50% APR for vehicle loans

6.00% to 12.25% for equipment loans

$10,000 to $100,000

Not disclosed

Purchasing vehicles or equipment

In 2013, Wells Fargo Bank committed to lending $55 billion to women-owned businesses by the year 2020. The bank offers several small business loan products, including its Equipment Express Loan. The interest rate on the bank’s secured vehicle loans starts as low as 5.50%.

However, you’ll need to be an existing customer of the bank to apply. Wells Fargo small business loans are only available to customers who have had a checking or savings account with the bank for a minimum of one year.

4. Celtic Bank

Type of financing

Rate

Amount

Min. credit score

Best for...

Express Loan

Variable

$20,000-$150,000

Not disclosed

Wide variety of loans

Celtic Bank is perhaps best known as an SBA lender, but the Utah-based lender offers a variety of loans well-suited to all types of businesses, small to large. The Celtic Express loan offers loans between $20,000 and $150,000 for up to 120 months.

To be eligible, the business must be a for-profit, owner-operated enterprise. Loan proceeds may not be used for construction or tenant improvements. Newer businesses are considered, but you must have a location identified and be able to start operations at funding.

5. OnDeck

Type of loan

Rate

Amount

Min. credit score

Best for...

Short-term loan

11.89% APR and up

$5,000 to $500,000

600

Business owners with lower personal credit scores

OnDeck is an online lender that has funded over $6 billion in small business loans for women. The lender offers business loans for women with bad credit, with a minimum credit score requirement of just 600. However, its APRs start relatively high, at 11.89% and up.

In order to qualify for a loan with OnDeck, your business must be at least a year old and earn at least $100,000 a year in revenue. Those who qualify may receive funding within as little time as 24 hours.

Alternative financing options for women-owned businesses

Grants for female business owners

Small business grants can provide you with funds to start or expand your business — and, unlike loans, they don’t have to be repaid. Grantors who fund women-owned businesses include the federal government, local governments and private funds. The amount of money available and the requirements to qualify will vary depending on the source of the funds.

Here are a variety of women-owned business grants to consider:

  • Amber Foundation Grant.Grants of $4,000 are awarded on a monthly basis to women-owned businesses of all kinds. Monthly grant winners are eligible for an additional $25,000 grant at the end of the year.
  • Cartier Women’s Initiative. This grant is for women-owned, women-run businesses focused on sustainable social and/or environmental impact. Applicants in a select group receive one-on-one business training and cash awards of $30,000 or $100,000.
  • Girlboss Foundation Grant.Grants are available up to $15,000 for women entrepreneurs working in the areas of design, fashion, music or the arts.
  • NASE Growth Grants. The National Association for the Self-Employed (NASE) offers $4,000 grants for female business owners. You must become a NASE member to apply.
  • SBA. Though there technically are not Small Business Administration grants for women (or anyone else), the SBA does facilitate federal grants for all types of business owners through the Small Business Innovation Research and the Small Business Technology Transfer programs.

Equity financing opportunities

Venture capital firms and individual investors, sometimes known as “angel investors,” differ from lenders. Instead of offering debt, these venture capitalists offer to make a long-term investment in your company in exchange for equity. They may also require some form of ownership and/or a seat on your company’s board of directors.

Here are some investing groups and firms that cater to women-owned businesses:

Additional resources for women-owned businesses

  • SBA Women’s Business Centers: The SBA offers over 100 office locations throughout the U.S. where women can receive free training, workshops, mentorship and more. Use the SBA directory to find your nearest location.
  • Women-Owned Small Businesses (WOSB) Federal Contracting Program: This federal program sets aside contracting opportunities for women applicants in industries where women’s businesses are underrepresented or disadvantaged. Those industries include construction, manufacturing, publishing and more.
  • National Women’s Business Council (NWBC): This federal advisory committee advises the president, the U.S. Congress and the SBA on matters affecting women entrepreneurs and women-owned businesses. The NWBC hosts round-table events around the country to gather input and promote women’s STEM-focused and rural-owned businesses.
  • DreamBuilder: This free online program offers interactive courses for women on how to start, build and finance your business. Courses are available in Spanish and English.
  • National Association of Women Business Owners (NAWBO):NAWBO is an advocacy organization that promotes networking events for women entrepreneurs, provides online resources and has local chapters throughout the U.S.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.