Women and Loans: How We Can Fix the Small Business Lending Gender Gap

4 min read · 6 years ago


Are you a woman? Are you interested in starting a business? If so, there are many resources that can provide you with the advice and guidance you require to get on the right track.

For example, the National Association of Women Business Owners (NAWBO) has been the “unified voice of America’s more than 10 million women-owned businesses” since 1975.

Despite the fact that the gender gap in business has started to close over the past few decades, there is no denying the fact that problems still exist. Even with a variety of small business loans for women, they are not funded nearly as often as their male counterparts.

How Big Is the Problem?

As of last year, women-owned business in the United States generated approximately $1.4 trillion in revenue and employed nearly eight million people. These are not small numbers. This data proves that women entrepreneurs are doing big things.

Even with such a large impact on the business world, women only received 4.4 percent of total dollars in conventional small business loans.

This isn’t the type of problem that is here today and gone tomorrow; it is one that will continue to linger until a solution is found. Unfortunately, there is no easy fix. Instead, it will take many years of dedication, both by lenders and venture capital firms, for results to be seen.

Earlier this year, CIO published an article entitled “Why Venture Capitalists Don’t Fund Women-Led Startups.” While the title says it all, there are details throughout that will turn your head. Here is one passage in particular that stands out:

“The Babson College study found that access to venture capital for women entrepreneurs is hard to come by. Only 15 percent of venture capital-funded companies have a woman on the executive team, up from 5 percent in 1999. Even worse, a mere 2.7 percent of venture capital-funded companies have a woman CEO.”

Speaking of the Babson College study, let’s focus on some of the key takeaways:

  • Women have made progress in obtaining venture capital since the turn of the century; however, the gap is still quite large.
  • Venture capital firms with at least one woman partner is roughly twice as likely to invest in a company with a woman as part of the executive team.
  • Companies with women entrepreneurs perform just as well, if not better, than those headed up by men. A company with at least one woman on the executive team is more likely to have a higher valuation both upfront and during its last funding round.

You would think these types of statistics would have a positive impact on the number of women entrepreneurs who receive funding, but this has not been the case.

Recommendations for Improvement

Just like men, women entrepreneurs realize that obtaining venture capital could be the difference between great success and never reaching their goals. This is why it is essential to improve access to venture capital for women. Here are some recommendations:

  • Showcase the success of women-owned businesses that have been funded.
  • Play up the fact that women business leaders continue to do big things, such as Marissa Mayer at Yahoo.
  • Examine why so few women are part of the venture capital industry, while also urging those firms to consider adding women investors to key roles.

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Fast Remedies to an Ever Present Problem

At this point, you should have a solid grasp of the problem, including why continued improvement has stalled. This type of problem cannot be fixed overnight, but there are some remedies that will generate a more immediate response:

  • Educate women, as well as the lending industry, in general. Here is one of the most difficult aspects of the small business lending gender gap: it is nearly impossible to identify the exact reason(s) why women find it a challenge to access capital. However, by educating women, they can gain a clear view of what type of funding is available, how to secure it, and what they can do to improve their chance of success.
  • Continue to play up the benefits of alternative lending and new technology. Women have come a long way over the past 15 years in regards to their place in the business world. Over this time, a lot has changed in terms of lending and technology. For example, crowdfunding has taken the world by storm. Along with this, technology, such as the ability to search for small business loans online, has improved.

The 21st Century Barriers of Women’s Entrepreneurship

Last June, a report was published by the Majority Report of the U.S. Senate Committee on Small Business and Entrepreneurship. All 38 pages of the report are well worth reading, as they explain the challenges women entrepreneurs face, key statistics, and other related data.

For instance, the report shared this nugget of information:

“The U.S. Government has never met its goal of awarding 5 percent of federal contracts to women-owned businesses. If they did, women-owned businesses would have access to marketplace opportunities worth at least $4 billion each year.”

If the U.S. Government has yet to reach its goal, how can we expect anything different from the lending industry as a whole?

The Future Will Tell the Story

The small business lending gender gap is closing, but the problem still remains. The next five to ten years will tell the story.

Do you feel that the lending gap between male and female entrepreneurs will continue to shrink? Share your thoughts in the comment section below.

About Meredith Wood

Meredith Wood is the Editor-in-Chief at Fundera, an online marketplace for small business loans that matches business owners with the best funding providers for their business. Prior to Fundera, Meredith was the CCO at Funding Gates. Meredith is a resident Finance Advisor on American Express OPEN Forum and an avid business writer. Her advice consistently appears on such sites as Yahoo!, Fox Business, Amex OPEN, AllBusiness, and many more. Meredith is also the Senior Financial and B2B Correspondent for AlleyWire.

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