By Charles H. Green originally posted on SBFI.com
A common theme in business and finance circles is that women are underrepresented, less capitalized, and face an uphill battle when it comes to building and financing their small businesses. While the statistics may bear this out to some degree, the women-owned business horizon is markedly better than the picture painted by this conventional data.
I recently had the opportunity to speak with Kristi Norton, Marketing Manager at
Dealstruck, an online small business lender, to learn more about how women are bucking the trend of negative perceptions in lending to women business owners.
“It is true that though women represent slightly over half of the U.S. population but they only own 30% of the businesses,” Norton stated, “It is also true that they employ approximately 6% of American workers[1] and that their sales are 25% of those of their male-owned counterparts.[2] However, it is also true that women owned businesses are growing at a rate of 1,200 per day, far outpacing the growth rate of those owned by men, and one and a half times the national average.[3] Four out of ten new businesses are now owned by women.”[4]
Since women own a greater share of enterprises that are in high growth service industries, like education and health care, they have a great deal of opportunity for continued expansion.
Women-owned enterprises do tend to be smaller than those owned by men, but small is mighty. Businesses owned by women had revenues of nearly $1.5 trillion last year, up nearly 80% since 1997.[5] In addition, women-owned businesses added more than a half million jobs to the economy between 1997 and 2007, a time when the overall job rates plummeted.[6] Clearly, the economic impact of businesses owned by women is more significant than common statistics would indicate.
Small business lenders see similar trends in their borrowers–women tend to seek smaller loans than men. Norton explained that Dealstruck sees the same thing among its borrower base. “After controlling for a variety of factors including industry, revenue size and FICO score, we find that our male borrowers, on average, request $10,000 to $20,000 more than our female borrowers. So, while women-owned businesses are performing as well as their male-owned counterparts, they are taking on less risk.”
But these smaller loan amounts are in no way inhibiting motivated women with the drive to build successful enterprises. If you tell these women that the statistics are against them, they will show another perspective. Just ask Winter Taylor and Leanne Abraham, two of Dealstruck’s borrowers who are living proof that, while woman-owned businesses may take less risk, they are flourishing.
Following a lucrative career in retail, Winter Taylor left the workforce when 12 hour days began to take their toll during her pregnancy. She soon launched Mommy Makes the Money, LLC, an eCommerce reseller of consumer goods. After initially self funding, Taylor secured business financing from an online lender, enabling growth of nearly 30% that year, with 2014 revenue surpassing $500,000. Taylor feels that the potential for her business is even more significant. “The one thing that makes me optimistic about my eCommerce future is that I’ve been very willing to try new things … I really feel like I’ve just hit the tip of the iceberg.”
Another Dealstruck customer, Leanne Abraham, owner of Premierhire Executive Search and Staffing has gone gangbusters with her business, with 300% revenue growth in 2013 alone. Her staffing agency continued to expand and Leanne realized she needed capital to weather the ebbs and flows inherent in her industry and sustain continued growth. “Since we started with Dealstruck, we’ve almost doubled our business again, and we’re able to continue to grow with them as our lending partner.”
“Many of the companies owned by women are smaller, making business financing a challenge,” Norton explained, “When a company is too young or too small to qualify for an SBA or traditional bank loan, small business owners have historically had few options.”
Since the economic downturn in 2008, traditional banks have shifted focus to small business loans in excess of $1 million. But the majority of small businesses seeking capital are looking for less than $250,000, leaving a large unserved segment.[7] It is estimated that $550 billion of small business financing is left unaddressed by traditional banks. A new generation of online lenders has filled that gap.
“Alternative lenders like Dealstruck fill a void by offering a variety of financing options to provide access to capital for companies that otherwise would have no means to obtain money to finance growth. Currently, women-owned businesses make up approximately one fifth of Dealstruck’s accounts,” says Norton, “And while this is a growing number, even within the Dealstruck portfolio, we are proud to report that we are already outperforming the SBA average.”[8]
Growth in the woman-owned business sector of the economy continues, despite historic statistics that tend to be one-census too old. But for every report stating that men own two-thirds of the country’s businesses, women business owners cheer that they control a third. A mighty third. And that’s growing.
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[1] Small Business Administration, http://www.sba.gov.
[2] “Women Owned Businesses in the 21st Century”, U.S. Department of Commerce Economics and Statistics Administration for the White House Council on Women and Girls, October 2010.
[3] “High-Achieving Women-Owned Firms Increasing Faster Than Expected”, American Express Open Forum, July 9, 2013, https://www.americanexpress.com/us/small-business/openforum/articles/high-achieving-women-owned-firms-increasing-faster-than-expected/?linknav=us-of-topics-findmore-stateofwomen-ownedbusinessesreport-article.
[4] “Women Launching 1,200 New Businesses a DAy, New Research Shows”, American Express Open Forum, August 13, 2014, https://www.americanexpress.com/us/small-business/openforum/articles/women-launching-1200-new-businesses-a-day-new-research-shows/?linknav=us-of-topics-findmore-stateofwomen-ownedbusinessesreport-article.
[5] Julie Weeks, “Women-Owned Firms Springing Up All Over”, American Express Open Forum, May 18, 2015, https://www.americanexpress.com/en-us/business/trends-and-insights/articles/women-owned-firms-springing/?linknav=us-openforum-search-article-link5.
[6] “Women Owned Businesses in the 21st Century”, U.S. Department of Commerce Economics and Statistics Administration for the White House Council on Women and Girls, October 2010.
[7] “Joint Small Business Lending Survey 2014”, Federal Reserve Bank of New York, February 17, 2015.
[8] Small Business Administration, http://www.sba.org.