What do Women Entrepreneurs Need to Grow?

Invest in Women Entrepreneurs Initiative (I-WE) publishes first study on what women business owners actually need to grow.

By Claudia Viek, Founder/Catalyst, Invest in Women Entrepreneurs Initiative and former CEO of CAMEO

Women-owned businesses with revenues between $250,000 and $5 million struggle to find the loans they need to grow their businesses – that’s according to a new survey of women business owners about their capital needs by Invest in Women Entrepreneurs Initiative (I-WE).  Thus, an undercapitalized group of successful and established women entrepreneurs don’t have access to the financial tools they need to grow their businesses, create jobs, and contribute to our country’s economic output.

It is well known that women starting a new business struggle to get capital. This survey shows that even women who have been in business for years and have strong revenue streams share the same struggle. Nearly half (46%) of respondents said they were actively looking for credit.  Lines of credit to finance new contracts and growth were the overwhelming need expressed by all sizes of business. These seasoned women business owners’ opportunities for growth are being hampered by lack of access to appropriate capital products.

Overall, women entrepreneurs receive approximately 80% less capital and receive only 5% of equity capital annually compared to male-owned businesses, according to the Kauffman Foundation. Fundera shows that even among Small Business Administration-backed loans, women receive 2.5 times less money than men.

Study after study shows women receive significantly less capital than men and that most women business owners ask for significantly smaller loans, which make them less appealing to traditional bank lenders seeking to make larger, more profitable loans.  What’s new from our survey is that a significant segment of women-owned businesses are well-qualified and seeking larger amounts of money, but are unable to secure it.

Our findings reinforce the 2018 Report on the State of Women-Owned Business by American Express, which emphasized:

Growth in both employment and revenues begins to take off for women-owned businesses when they reach $250,000 in revenues. Supporting businesses on the cusp of crossing this threshold ($100,000 to $249,999) — and those that have crossed it — could accelerate the growth of larger women-owned businesses.

Banks often do not understand their needs because their businesses are primarily service industries, without significant collateral like equipment or property assets. CDFIs don’t offer lines of credit because of the additional management required and the assumption that businesses will “max out” their credit.   

The I-WE survey results contradict these biases and assumptions:  lenders have a huge opportunity to serve a well-qualified market of women business owners. Supporting the growth of women entrepreneurs will generate significant economic value in our communities. I-WE estimates, conservatively, that the women in the survey represent a $500 million financing opportunity, that would create an additional 10,000 jobs.

Recommendations from the survey include:

  1. Financial institutions, including nonprofit CDFIs, should create Lines of Credit loan products for the “missing middle” of women entrepreneurs.
  2. The SBA’s budget for the Office of Women-Owned Businesses should be increased to $50 million to expand services to enable the growth of more women entrepreneurs through training, coaching and capital access.

About the Survey

I-WE recently surveyed 400 members of WBEC-West and WBEC-Pacific, two West Coast affiliates of the national Women’s Business Enterprise Network Council (WBENC), that certify women-owned businesses for corporate suppliers. The survey focused on established, sustainable and growth-oriented enterprises, because they are potentially of more interest to lenders.

About the Invest in Women Entrepreneurs Initiative

The Invest in Women Entrepreneurs Initiative, founded in 2018, is a network of women business leaders committed to changing the status quo of chronic under-funding of women entrepreneurs.  We intend to increase resources and capital for women-owned businesses and thereby improve and sustain local economies.