Women entrepreneurs are some of the most successful (though mostly overlooked) leaders on the planet. There are more than 11.6 million woman-owned companies in the U.S., alone, where women are starting companies at 1.5 times the average rate.
Just how successful are they? Their revenue is growing fast, generating more than $1.7 trillion annually (that’s more than a 79% increase since 1997). Woman-owned companies also employ nearly 9 million workers, and comprise about 20% of companies in the U.S. that generate $1 million or more.
But the longstanding gender gap has given way to what seems to be a growing lending gap, as banks, venture capitalists and other funders overlook a majority of woman-owned companies in favor of those run by men. And it’s not that women have bad ideas (because the facts show that many of these businesses are majorly successful). One LSU study showed women entrepreneurs have a much harder time getting traditional loans. Previous studies found that only about 1.3% of all VC financing is granted to women. And minority women business owners get an even smaller piece of the funding pie.
While things like a company’s track record, business plan and financials play an important role in funding, research shows many investors also let perceptions infiltrate their decision-making. And those perceptions most often look unfavorably on female entrepreneurs.
Michael Johnson, Assistant Professor of Management at LSU, put it this way: “Historically, funding from banks, private equity and venture capital is more likely to go to men because of the perception that business leaders should be masculine. In contrast, crowdfunding investors see female entrepreneurs as more trustworthy; this perception leads to higher overall investment in female-led ventures over male-led ventures. In this instance, gender bias works in their favor.”
Still, woman-owned businesses are pushing forward despite the biases and lack of traditional funding—and winning. Maybe it’s a woman’s ability to push through the pain, or maybe it’s because they’ve had to prove themselves so many times, but women entrepreneurs have a grit and a tenacity that is unmatched. And despite the challenges, women entrepreneurs consistently rank their happiness as three times greater than non-women entrepreneurs.
Overcoming the challenges
But amidst all the negative stereotypes and perceptions of female businesses owners, and an apparently widening funding gap, there is hope on the horizon. The Small Business Administration was designed to spur economic growth by funding small business ventures. After all, small businesses are the backbone of the American economy. And because women, who make up about 38% of new businesses, are a vital part of that economy, the SBA has loans specifically earmarked for them.
At Cornerstone Capital Lending, we know the SBA loan landscape—and the business landscape too. And we have helped many women-owned businesses get the funding they need to get their businesses of the ground and keep them moving forward. Want to know more? Contact our team today to discuss your business venture and funding needs.