Access to capital is often cited as the biggest challenge that any entrepreneur faces. Once again, women face the same challenge, but improving women business owners’ access to capital requires a different solution.
Here are the facts on women led firms and capital:
- Women account for 30 percent of small companies but receive only 4.4 percent of the total dollars in conventional small-business loans. Put another way, women receive $1 for every $23 loaned. Minority business owners pay, on average, 32 percent higher interest rates than what their white counterparts. Source: Senate Small Business & Entrepreneurship Committee, 2016
- On average, men start their businesses with nearly twice as much capital as women ($135,000 vs. $75,000). This disparity is slightly larger among firms with high-growth potential ($320,000 vs. $150,000), and much larger in the Top 25 firms ($1.3 million vs. $210,000). Source: NWBC, 2012
- The major constraint limiting the growth, expansion, and wealth creation of small firms—especially women- and minority-owned businesses—is inadequate capital. Studies indicate that women entrepreneurs have less access to financial capital or make less use of it than male entrepreneurs. Source: SBA, 2013
- 7% of the 2,005 founders who received VC funding in 2016 in the US are women. Source: Bloomberg, 2016
In addition to the more finite system challenges with specific funding resources, women business owners also face cultural challenges. Our gendered culture means that women face money/risk/debt aversion, multiple life commitments and a lack of finite business training to build confidence around financial skills.
Trends and Best Practices
There has been a notable shift and increase in alternative sources of capital, such as peer-to-peer lending and hybrid models.
Rewards-based crowdfunding platforms are giving women unprecedented access to capital. Indiegogo has reported that 42.0% of its crowdfunding campaigns are run by women and women raise more funds than men both in terms of the number of contributions and amount of money. Plum Alley is crowdfunding for women by women. Founded by Deborah Jackson, this platform helps women find money to get started (through a six-step plan to tap potential donors in their social networks) and helps them find customers (through an online shopping site).
Lending institutions and investors are increasingly acknowledging that women entrepreneurs have the ideas, drive and passion to build enterprises that disrupt markets and show great return on investment. Source: NWBC, 2016
So if you work with women business owners (or you are one yourself) what are the finite tools you need?
1.) Have a strong list of diverse capital resources. Below is our growing list of capital resources for women owned businesses in Phoenix
2.) Develop a strategy to work specifically with women business owners about capital.
According to Maureen Collins Williams, who executed research on entrepreneurs in 2015-SmallBusinessReport- IOWA, when women business owners discuss funding they see business debt as hindering their ability to pay for their child’s tuition and a parents healthcare. Discussions about funding, risk and capital need to be approached holistically.
This is just one example of how to approach working with women business owners differently in order to be effective.
What funders and capital partners need to know about women business owners.
Women business owners represent a growing powerful market. Developing a strategy to access this market will be critical for lending organizations in an increasingly competitive market.
Here are some great tools and research studies for bankers regarding working with Women Business Owners: Global-Best-Practices-Banking-Women-Led-SMEs-WomensWorldBanking (1)
Here is an outline of the best practices they recommend for bankers:
- Know your market and customer. Conduct market research.
- View Women-Led SME’s as a distinct group. They don’t want different products, they want to be served differently.
- Build Internal Capacity. Complete buy in for gender awareness.
- Adapt your credit processes, lending methodologies and delivery models. Adapting credit processes and adding a mix of delivery channels can also help to meet women’s needs, including:
- Flexible loan terms, adapted disbursement or repayment features
- Fixed or mobile assets such as household goods or jewelry as collateral
- A mix of service delivery channels, including branch, agent, mobile, and online
- Bank branches with women-dedicated staff
- Dedicated outlets or agents at locations frequented by women
5. Offer women a comprehensive mix of financial and non-financial products and services
6. Track your data by gender.
Finally, here is the run down of capital resources for women business owners in Phoenix and from across the nation. This list is not exhaustive and if you know of other resources, please post it below.
Our resource list has banks, micro-lenders and partners that have regularly attended Empowered PhXX meetings. If you would like to sit down with a real person, please review this list. Several of the programs below have specific contacts listed in our resource list.
If you have any questions about what options to consider, or would like to just sit down with someone to ask specifics about programs, email Kristin Slice.
The Arizona Commerce Authority has several grants and incentives. The Innovations Challenge if you are a high-tech, healthcare or innovation business, AZ Innovations Accelerator Fund if you are looking to finance for job expansion in manufacturing and SBIIR / Commercialization support. The competition for these grants is rigorous so make sure to access one of the partners like the SBDC or a one of the many business incubators on our list to prep.
The City of Phoenix offers the Expand program which is additional collateral support for business owners who are looking for a business loan to expand and hire in Phoenix and the MTA program which offers free business technical assistance (literally they pay a consultant to execute work for you).
The Women’s Enterprise Foundation offers yearly small grants and scholarships for women business owners looking for professional development training and membership into NAWBO to access their extensive mentoring program.
There are no women-led specific investor funds in Phoenix. Pipeline Angels is launching in the fall focusing on social entrepreneurship ventures.
Here is the list of investor funds available in Phoenix: Investors (1)
The Small Business Administration, the Small Business Development Center and the Women’s Business Center regularly have training on financial education at various levels.
Women are establishing funds that specifically look for companies with women founders and leaders. Here is the link to our open sources list of women specific capital funds from across the country.
National List of Grants for Women Business Owners