Research Summary

Women Business Owners Make Progress in Access to Capital

Center for Women’s Business Research  ·  October 17, 1996

Still Lag Men-Owned Businesses in Credit Levels

“Capital, Credit and Financing: Comparing Women and Men Business Owners’ Sources and Uses of Capital” is the first study to directly compare women and men business owners’ perceptions about financing as well as their sources and uses of capital. The study, underwritten by Wells Fargo Bank with additional support from AT&T Credit Corporation, focused on established, commercially active businesses.

“Over the last several years, bankers have begun to recognize that the nearly 8 million women-owned businesses in this country are a great, untapped market,” said Susan Peterson, NFWBO Chair and President of a Washington, DC-based communication training firm. “And women business owners have become increasingly more sophisticated in dealing with financial institutions.”

Women business owners’ sources of capital have changed significantly between 1992 and 1996. Nearly three-quarters (72%) of women entrepreneurs are using business earnings to finance their firms, double the number four years ago. At the same time, the percent using credit cards as a source of capital has been cut in half, down to 23%, a level very similar to men entrepreneurs.

While there is growing similarity between women and men business owners’ sources of capital, they use their credit for different purposes. Women use it primarily for growth and expansion; men are more likely to use it to smooth out cash flow and consolidate debt.

Relationships with banks, reported by many women entrepreneurs as a problem in the past, are improving. The percent reporting one or more problems in working with their banks has dropped overall by 15% and now is at about the same level as men.

“This improvement in relationships between women entrepreneurs and banks is no accident,” said Lucy Reid, Executive Vice President, Wells Fargo Bank. "The 1992 numbers from the National Foundation for Women Business Owners documenting both the growth of women-owned enterprises and their problems in obtaining financing shocked the banks, including ours, into action. At Wells Fargo, we were surprised to learn that women perceived that they had less access to capital than men. Since women business owners are as financially responsible as men business owners, we saw an opportunity and we stepped up our outreach efforts."

Today, women business owners are just as likely as men business owners to have bank credit (46% of women entrepreneurs compared to 49% of men entrepreneurs) and are just as likely to report being satisfied with the amount of credit available to them. Further, the range of sources that women- and men-owned businesses turn to for capital is very similar.

“Entrepreneurs, and women business owners in particular, are actively pursuing new and different ways to obtain the capital they need to thrive,” said Gerri Gold, President of AT&T Credit. “For example, through leasing, businesses can acquire or upgrade their equipment to better serve their customers and grow.”

“The challenges faced by women entrepreneurs have not disappeared, however,” reported Peterson. “Women business owners still have lower levels of available credit than their male counterparts.”

Forty-three percent (43%) of women-owned businesses have no more than $25,000 available credit compared to 37% of men-owned businesses. Further, women entrepreneurs were less likely than men business owners to seek credit in the past year (27% of women-owned businesses sought credit compared to 34% of men-owned businesses).

“The progress reported in the study has been made possible in large part thanks to the concentrated efforts of many women business owner advocates in both the private and public sectors,” said Suzanne Taylor, national president, National Association of Women Business Owners (NAWBO) and president of Irvine, California-based STA Southern California, Inc., a critical care services firm. “We cannot afford to lose the momentum that has been established. Hopefully, this study will reinforce to all financing sources that making credit available to women-owned businesses is good business.”

Charts

More Women-Owned Firms Relying on Business Earnings, Not Credit Cards

Perception of Bank Treatment Has Improved Among Women Business OwnersWomen Business Owners More Likely to Use Credit for Business ExpansionMore Business Owners Feel They Have Sufficient Capital to Maintain Business Growth

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