Skirting the Gender Bias in Access to Business Capital
Gina Blitstein combines her insight as a fellow small business owner with her strong communication skills, exploring topics that enhance your business efforts. That first-hand knowledge, matched with an insatiable curiosity to know more about just about anything, makes her a well-rounded writer with a sincere desire to engage and inform.
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Skirting the Gender Bias in Access to Business CapitalA male and female entrepreneur walk into a bank… Unfortunately, the rest of that sentence is not humorous. The sentence ends with a resoundingly disheartening result: the man is more likely to walk out with the funding he needs for his business. This highlights a serious gender bias in traditional lending. The bias results in women-owned businesses receiving less funding, in smaller amounts. Adding insult to injury, female entrepreneurs are more likely to be steered toward different products than their male counterparts - even when their financials are comparable. Even the criteria differ between males and females where lending is concerned, with men being asked about their potential for growth and profit, while women are asked about their potential for loss and risk. This speaks to a systemic dynamic that underlies the whole lending landscape, shaping not only who receives funding, but the level of confidence they’re encouraged to have regarding their potential success. This bias creates specific challenges for women seeking funding - but they’re not insurmountable. In recent years the funding landscape has expanded far beyond the bank loan - and some of those channels are not only more accessible but sometimes better suited to the way they build their businesses. Some alternative sources of funding include: SBA loans - The Small Business Administration doesn’t lend money directly but guarantees loans made by approved lenders, reducing the lender’s risk and improving access for borrowers who might not qualify for conventional financing. When shopping for an SBA lender, seek out those who participate in the SBA’s Women-Owned Small Business (WOSB) certification program - lenders familiar with that program tend to have stronger track records with women applicants. CDFIs - Community Development Financial Institutions serve borrowers who are underserved by traditional banking. They’re mission-driven and many have explicit commitments to minority entrepreneurs like women. They tend toward a more holistic view of creditworthiness, figuring attributes like character, community ties and business potential into the equation. These lenders often offer more flexible terms and additional support services like coaching and peer networks to further support your professional growth. Grants - There’s more "free money" out there available to women-owned businesses than most people realize. Sure, grant applications require the investment of time and intentionality, but the payoff - capital with no strings attached - is worth it. Some grant sources worth investigating include:
Alternative and peer-to-peer lending - The advent of online lending platforms has opened new avenues of funding for women due to their algorithm-based underwriting, reducing the role of human bias in approval decisions. Platforms like Fundbox, Kabbage, and OnDeck could be worth a look, despite their sometimes higher interest rates. Peer-to-peer lending platforms, like Kiva, connect borrowers (particularly in early-stage development) directly with individual investors and often offer more flexible criteria than banks. Crowdfunding - Platforms like Kickstarter and Indiegogo allow you to raise money directly from customers and supporters. A successful campaign not only provides funding but validates your business’ viability by proving interest in and demand for your offering. Equity crowdfunding on platforms like Republic and Wefunder allows you to raise larger amounts by offering small ownership stakes to a broad pool of investors. More regulatory compliance is necessary but they open access to capital previously available only to businesses with venture connections. Build your financial profile deliberately Regardless of gender - or the source of financing you’re pursuing - it’s prudent to build a financial profile that keeps traditional lending on the table as an option. Attend to these important pieces of the puzzle:
A man and a woman might not walk into the same bank and each come out with the funding they need, but it’s encouraging to know that she has viable alternatives. As female entrepreneurs increasingly fund their growth through channels that align with their values, networks and vision, the gap left by traditional lending is being filled - authentically and on their own terms. What financing obstacles have you run into along the way - and what funding strategies have ultimately worked for your business? Read other Gina articles |