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Women Business Owners:
Part Two ... Credit

See also:
Women Business Owners: Part One ... Clout
Women Business Owners: Part Three ... Technology
Women Business Owners: Part Four ... The Internet
Women Business Owners: Part Five ... Capital
Women Business Owners: Part Six ... Capital

          Substantial progress is being reported by women-owned businesses in gaining access to capital and bank credit. The National Foundation for Women Business Owners, now the Center for Women's Business Research (CWBR), conducted a study of women business owners’ access to capital in 1996; this can be compared with its baseline study undertaken in 1992. This survey, underwritten by Wells Fargo Bank with additional support from AT&T Credit Corporation, focused on established, commercially active businesses -- not startups. It is the first investigation to directly compare women and men business owners' perceptions about financing as well as their sources and uses of capital.

          Today, men and women business owners have comparable access to bank credit (49 percent of men entrepreneurs compared to 46 percent of women entrepreneurs), and men and women business owners appear to be equally satisfied with the amount of credit available to them. The range of sources to which men- and women-owned businesses are turning for capital is very similar.

          Compared with the 1992 baseline survey, women business owners are now much more likely to report satisfaction with their banking relationships and much less likely to use credit cards as a source of capital. Notwithstanding this progress, women-owned businesses still report lower levels of credit and appear to be more reluctant to seek financing than male-owned 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," notes 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."

          Significantly, the sources of capital being used by women business owners' have shifted between 1992 and 1996. Almost three-quarters (72 percent) of women entrepreneurs are now using business earnings to finance their companies, double the number four years ago. At the same time, the number using credit cards as a source of capital has been sliced in half, down to 23 percent, a level comparable to men entrepreneurs.

          Although there is an increasing similarity between the sources of capital for women and men business owners, their credit is employed for different purposes. Women use credit primarily for growth and expansion; men are more likely to use it to smooth out cash flow and consolidate debt. Reported as a problem by many women entrepreneurs in the past, banking relationships are now improving. The number of women reporting one or more problems working with their banks has dropped 15 percent overall; this is now about the same level as men.

          "This improvement in relationships between women entrepreneurs and banks is no accident," explains Lucy Reid, Executive Vice President of the 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."

          "Entrepreneurs, and women business owners in particular, are actively pursuing new and different ways to obtain the capital they need to thrive," observes 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."

          However, Susan Peterson cautions, "The challenges faced by women entrepreneurs have not disappeared ... Women business owners still have lower levels of available credit than their male counterparts." While 37 percent of men-owned businesses have no more than $25,000 available credit, the comparable proportion of women-owned businesses is 43 percent. Further, women entrepreneurs were less likely than men business owners to seek credit during the past year (27 percent of women-owned businesses sought credit compared to 34 percent 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," emphasizes Suzanne Taylor, President of the National Association of Women Business Owners (NAWBO) and President of STA Southern California, Inc. (Irvine, California), 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."


This column is based upon research conducted and published by the National Foundation for Women Business Owners (now the Center for Women's Business Research), 1411 K Street, NW, Suite 1350, Washington, DC 20005-3407.

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