3 Reasons Women Entrepreneurs Have Trouble Finding Funding
Posted on November 1, 2016 by Lioness Staff
Women entrepreneurs are on the rise, but statistics say their funding isn’t. In fact, though women account for 30 percent of the business owners in the US, they only get 4.4 percent – or $1 out of every $23 – of small business loans. Why is this, and how can women entrepreneurs work around this issue? Take a look at some common causes and solutions when it comes to funding women-owned businesses.
Women Don’t Fit the Stereotype of the Successful Entrepreneur
When most people think of a successful business owner, they still think of a man. This is probably because about 70 percent of business owners are men. Add in the fact that men have been starting and managing businesses for decades longer than women have, and you can see why the stereotype of the male business owner exists. So when lenders see women entrepreneurs asking for money, their first thought is often that they can’t trust that the business will be successful and therefore profitable. This makes them less likely to offer money to women-owned businesses.
Venture Capitalists Are Usually Men
Another reason that women find it hard to fund their businesses is that few venture capitalists are fellow females. Since people tend to trust others who look like them, it’s hard for female business owners to get funding from male venture capitalists. That’s probably why only 9 percent of businesses financed by venture capitalists are owned by women! Clearly, if you need money for your business as a female, you’re going to have to seek out fellow female venture capitalists if you plan to take this route for funding.
Women Entrepreneurs Have Lower Credit Scores on Average
The fact that female business owners tend to have lower credit scores than male business owners presents yet another roadblock for women entrepreneurs hoping to get funding. In particular, one report found that the average woman business owner’s credit score is 40 points lower than the average male business owner’s score. This obviously makes it harder for women to qualify for loans. The sad part is that one of the main reasons for the lower average score is that women often use their own personal credit cards to fund their business to begin with – all because they can’t find funding.
How to Get Around These Issues
These problems shouldn’t keep you from getting funding for your business. You might just have to get creative if you want your business to be among the more than 9 million women-owned businesses in the US. Finding female venture capitalists to get funding can help, as can seeking out investment firms that specifically focus on funding female-owned businesses, such as Golden Seeds. Similarly, you can look into grants created just for women in business. Crowdfunding is yet another option for getting funded, since one study found that women perform at least as well as men when it comes to raising funds online.
As you can see, women have a hard time getting funding for their businesses for a few big reasons that probably won’t change overnight. But that doesn’t mean the prospect of finding funding for your business is hopeless. As long as you’re aware of some common obstacles – and their possible solutions – you can get started on finding the money you need as a woman entrepreneur.
Ellen Sedrakyan is an entrepreneur, writer, business owner and has been in the insurance industry for over 14 years. Alongside managing USA Business Insurance, Ellen also contributes her expertise in finance and insurance to help small business owners grow.