There’s a gender gap when it comes to income, but is there one as well when it comes to owners receiving business loans? According to a congressional report issued this week, there is a huge disparity between what women and men receive when it comes to small business loans.
The report, which was issued by the Senate Small Business & Entrepreneurship Committee, points out that women own 30% of small businesses in the U.S. — yet they only receive 4.4% of conventional small business loans in terms of dollars given. When it comes to the loans themselves, women receive only 16% of conventional loans, and 17% of loans which come backed by the Small Business Administration.
“It’s important for all business owners, women and men, having difficulty receiving the funding they need, to be aware of the array of alternative solutions to bank-based lending. At LendSpark, we recognize and understand the frustrations of these business owners and are experts in the options available today. When a business comes to LendSpark after being turned down by a bank, we are able to examine the business and determine the best alternative option for them, whether it be an Asset Based loan, Equipment Financing or Invoice Factoring to name a few” says Todd Stichler, Co-Founder of LendSpark, a Carlsbad based lending and advisory firm.
Additionally, the report found that loan applications are more likely to be denied if the company is owned by a woman, and the loans they do receive are likely to have less flexible terms. When it comes to venture-capital funding, women receive a low 7% of the total.
“The numbers are jarring, for sure, and we need to own up to the fact that we want to see more women entrepreneurs and to make sure they’re getting access to capital,” said Senator Maria Cantwell, the committee’s chairwoman.
The report indicated that Congress needs to take steps in order to support women-owned businesses. As 30% of all small companies, helping them reach their goals will have an impact on the overall economy’s success. The report noted that even though Congress, in 1994, set a goal of awarding 5% of federal contract dollars to women-owned small businesses, it has never come closer than 4% since then.
“Women entrepreneurs still face a glass ceiling,” cautions the report.
Although it’s clear that something needs to be done, exactly why are women-owned businesses receiving so few loans? There are likely several reasons. In addition to an environment where female entrepreneurs are frequently perceived as less competent than their male counterparts, there is often a lack of knowledge regarding the available small business loans to begin with.
Women often miss out on “legacy knowledge” — an understanding of what to do, and how to find funding, passed from business owner to business owner. For this reason, establishing additional mentorship programs could help connect female entrepreneurs to each other in positive ways.