There are about 12.3 million women-owned businesses in the United States, yet women receive only 4% of commercial loans and 18% of loans backed by the Small Business Administration, according to a recent survey conducted by the Invest in Women Entrepreneurs Initiative in partnership with the Women’s Business Enterprise Council.
A 2018 American Express Report on the State of Women-Owned Businesses showed that women have gone from owning 4.6% of all businesses to 40%, yet account for only 8% of all employment and 4.3% of all revenue.
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Invest in Women Entrepreneurs
“Given the outsized contributions of (women-owned) million-dollar-plus businesses, focused efforts on graduating more women-owned businesses from the $100,000 to $999,999 category into the million-dollar-plus category will yield big economic gains,” the report concludes.
Easier said than done, says Claudia Viek, founder of Invest in Women Entrepreneurs, which sponsored the survey last summer revealing the miniscule percentages of commercial and SBA-backed loans given to women.
“I started this nonprofit as a catalyst for changing the status quo of chronic underfunding for women businesses,” Viek said. “We want to shine a light on the reasons why supporting women in business is a good investment in local economies.”
Viek believes the lack of growth capital available for women-owned businesses demonstrates a market failure, and a lost opportunity to increase the nation’s wealth.
The survey Viek conducted showed a “missing middle” of women-owned businesses with annual revenues between $250,000 and $5 million who struggle to finance their business growth.
The problem, says Viek, is sexism.
“Venture capitalists ask women different questions than they ask men,” she said. “They ask men about opportunities, they ask women about risks. Women play into that by talking about our needs, rather than talking about how I’m going to make money for you.”
Viek knows what she’s talking about. She has spent 30 years in entrepreneurial development, including 14 years as the executive director of the Renaissance Entrepreneurship Center in the Bayview District of San Francisco. The center is a community hub and resource center for aspiring entrepreneurs and established small business owners in the San Francisco Bay area.
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Invest in Women Entrepreneurs
Viek spent the last 10 years before she founded Invest in Women Entrepreneurs running a network of Community Development Financial Institutions focused on small businesses owned by women. She says she has seen the same bias in banks toward women trying to finance growth in their busiensses as she has seen in venture capitalists.
“These women are exactly the type of borrowers you would think banks would be looking for, but in fact they are missing this opportunity, due to a number of factors, including underwriting bias, mindsets, etc.,” Viek said.
She also pointed out that banks don’t have to report loans by gender to regulators, meaning they are not highly motivated to market to women.
“Women-owned businesses are local: They hire, spend and donate locally,” Viek said. “It follows that, by creating financial products that support women’s business growth, there will be a direct and measurable benefit to the regional economy where her business is located.”