Female Small Business Owners Still Struggling With Loans?

It has become well-known in the past several months that when it comes to having access to credit, many small businesses lag well behind their larger competitors. But more recent data suggests that this problem might be exacerbated when the entrepreneur in question happens to be a woman.

These days, lenders seem to remain particularly harsh when it comes to small businesses owned by women, in terms of granting their loan requests, according to a report from the Associated Press. Recent numbers show that their approval rates are anywhere between 15 and 20 percent below those for smaller companies owned by men, but experts say that there are several reasons for this.

One of the largest ones is, again, bank reticence to extend lending to any small business, regardless of the owner’s sex, the report said. Moreover, women-owned businesses tend to be younger, and therefore less established, than the ones owned by men, and that may give banks pause as well. But perhaps the biggest reason is that, in general, women tend to have lower credit scores than men. The average woman’s rating, in fact, is about 20 points lower than the average man’s, but the gap is closing; it used to be 40 points. Finally, more than two-thirds of small businesses owned by women across the country have revenues of less than $25,000.

Anecdotal evidence isn’t on their side either
Further, in talking to the AP for this story, many small business bankers noted that in general, women haven’t come into their offices as prepared as men have, which can further lead to a lack of approvals from lenders, the report said. However, women’s advocate groups say that this might be a result of their simply not being confident they’d get funding in the first place, which can make putting in the time seem like a waste of effort. On the other hand, that might simply create a vicious cycle, one that simply isn’t easy to break.

Owners who want to position their companies for success and a greater chance at approval for a loan might want to consider the benefits of cutting their ongoing costs. They might be able to do this by finding more affordable small business insurance – including errors and omissions insurance – to potentially slash expenses by as much as a few thousand dollars per year.