According to one foundation, "40% of new entrepreneurs in the US are now women, and the number of new women-owned businesses is growing at double the rate of male-owned businesses." Fundera reports that "Women own nearly 1 in 3 small businesses in the United States, which means female entrepreneurs run more than 10.6 million companies, account for over $1.3 trillion of revenue, and employ nearly 8 million workers." For Black women, the numbers are even more astounding. Black Enterprise Magazine notes that "Businesses owned by women of color have risen an astounding 467% in the past two decades, making them the nation’s fastest-growing group of entrepreneurs. And the growth rate of firms owned by black women is even greater with an eye-popping gain of 605% during that period. As of last year, there were over 2.2 million businesses owned by African American women with revenues of $56 billion and 398,400 employees." Wow! How is it that this is not front page news? We have described this in Thriving As a Minority-Owned Business in Corporate America: Building a Pathway to Success for Minority Entrepreneurs.
As with all minority business funding, the differentials are clear: "Women entrepreneurs get offered smaller loans across every product, from the same groups of online lenders, with no exception, and pay significantly higher interest rates than men do." This is what you find for every group out there, with the possible exception of Asian owned businesses, who are not as dependent on external sources. Going to a women owned bank is not likely to help, since there are so few of them. Six (6) Caucasian women owned banks hold $760 million in assets.
Still, women excel in one area: networking and support. MeetUp lists 4,633 Women's Business Networking groups with 1,636,873 members. If you can't find your tribe, you're not looking. This has got to be the first step. Make it a good one. In addition to exploring MeetUps, reach out on LinkedIn.
For women looking to start a business, the chances of your getting funding from external sources are limited: "women received only 10% of venture capital worldwide between 2010 and 2015. They receive just 16% of all conventional small business loans made each year and are 5 percentage points less likely to receive a loan than male entrepreneurs are."
Another source says "female founders raised just 2.2% of all venture capital dollars invested in 2018 and received just 5% of SBA loans." Another study showed that "female-led firms receive only 1.3 percent of venture capital financing. They are often asked to surrender a greater proportion of ownership when receiving private funding." Bottom line: we don't know how much money women missed out on, but we know it's significant.
We outline the sources and tactics we recommend below.
Request more informationLook at grants. There are many more of them for women. It is still a low probability financing option, but for women in particular, we think this, combined with networking, is a great way to start. Next, credit cards. Women, especially Black women, tend to start their business as a side hustle. This is very smart. Used wisely, this may be enough to get the initial seed capital you need to finance your side hustle. Stepping up from there, microcredit is next. Finally, bank loans.
There are only six (6) Women banks holding $800 million in assets, so it only makes sense to look at these institutions if you are in their area.
There are a number of microcredit platforms focused on women: "Accion, Opportunity Fund, Grameen America, the Tory Burch Foundation Capital Program, and Kiva...."
According to the Credit Union National Association (CUNA), "More than half (52%) of credit union CEOs are female, according to CUNA research, compared with only 5% of commercial bank and 6% of Fortune 500 CEOs." Given this, you would think that credit unions would be better at making loans to women. They are not. "Credit union business loans and credit union short-term loans work just like business loans from a bank. It’s generally no easier to get business loans from a credit union than a bank."
According to crowdfunding platform Indiegogo, "47% of successful campaigns on the site are run by women.." On Kickstarter, one study found that "on average, crowdfunders think female entrepreneurs are more trustworthy than male entrepreneurs," and " women were more likely than men to have their Kickstarter projects funded." The National Women's Business Council (NWBC) issued a report in March 2018 titled "Crowdfunding as a Capital Source for Women Entrepreneurs." If you are interested in crowdfunding at all as a women entrepreneur, you should read this report.
Women Business Financing Options are growing, but getting financing from these sites is still less certain. More suggestions are below.
Eligibility factors vary depending upon the type of business financing you are looking for, but there are a few factors which you should keep in mind. If you are going to a financial institution, a personal credit score of at least 650. According to one source, in 2010, "the average FICO (credit agency) score in America is 728 for a homebuyer." One report noted that "Biz2Credit found that the average credit scores for women-owned businesses dropped from 598 in 2017 to 588 in 2018 and trailed the scores of their male counterparts (613) by 25 points."
For most online small business loans, you need to be in business for at least a year.
$50,000 to $150,000
You will need to specify how you plan to use the money. Some financing types limit how you can spend the approved funds: equipment financing loans require you use the funds to purchase equipment.
If you have a question about women business lending, see the FAQ page.
For women, we think online lending options are good when they are tied to local, targeted lending sources. As with all sources, we suggest evaluating these sources carefully. They may work, but it is a case-by-case determination.
Take a look at our page on credit cards. Any type of lending from regulated financial institutions is difficult, especially credit cards. The cost of this financing is elevated, however, which means you must have a solid idea of the revenue your business expects to generate so that you can repay what are likely to be very expensive short term loans.
Other financing options and resources including grants, pitch contests and awards. You cannot count on any these. The demand for these resources far outstrips the supply, so your chances are minimal.
Some of these are "Shark Tank" like competitions.
See minoritybank.com, creativeinvest.com, diversityfund.net, moneytoday.info and hr41.info
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