Female Small Business Owners Aren’t Getting Enough Loans


Women own nearly 30 percent of the country’s businesses and represent the fastest growing segment. But they’re doing that without getting much financial support.

Only 4.4 percent of the money given out through small business loans goes to women business owners, according to a new report from the Senate Committee on Small Business and Entrepreneurship. Another way to put it is that just $1 in every $23 loaned out to small businesses goes to women.

In terms of the number of loans they get, women receive just 16 percent of conventional small business loans and 17 percent of Small Business Administration (SBA) loans.

Twenty years ago, the government set a goal of giving 5 percent of federal contacts to women-owned businesses, but it hasn’t ever met it. If women did get that share of contracts, they “would have access to marketplace opportunities worth at least $4 billion each year,” the report notes.

A solution for the last problem that it puts forward is changing federal law so that women-owned businesses can win sole source federal contracts. “This program remains the only major small business contracting initiative that lacks sole source authority — like that which is granted for other historically/traditionally disadvantaged groups,” it notes. It also notes that Women Business Centers, which provide training and business counseling to women who want to own businesses, particularly low-income women, haven’t been reauthorized since the 1990s and funding stayed fixed, so it proposes reauthorizing them and boosting funding. It also suggests expanding microloans and making the SBA’s Intermediary Loan Program permanent as a way to provide more capital.

Even with those fixes, however, women will likely still struggle if they want to start companies. If they turn to venture capital, they still can’t expect much: women got just 13 percent of venture capital funding last year, which at least marked progress from just 4 percent in 2004. And just 3 percent of the companies that went public, a way to raise money and grow a firm, were run by women between 1996 and 2013.

All of these funding problems may stem from the fact that those doling out the money prefer to give it to men. One study found that investors prefer a pitch from a man over a woman even when the content is the same. Another found that business school students who reviewed public offering prospectuses were four times more likely to recommend investing in companies led by men than by women.

Black small business owners are similarly getting left out of small business loans and federal contracts.