BREAKING THROUGH

all small businesses struggle to access these small
loans, women entrepreneurs face a particularly difficult
challenge. “This small dollar gap is much more of
an issue for women-owned businesses, because they
tend to be smaller and looking for smaller amounts of
credit,” says Karen Mills, former administrator of the
U.S. Small Business Administration (SBA). “Women entrepreneurs
are notoriously underserved on capital.”
To qualify for bank loans, small business borrowers
must provide a business plan, credit history, cash flow
projections, collateral and often guarantees. For many
women, this can be an insurmountable hurdle since
they tend to have fewer assets and, if they are firsttime
entrepreneurs, may not have ever written a business
plan or had to make financial projections. In New
York City, where more than 69 percent of residents are
renters, home equity loans aren’t typically an option either
and even when loans are available, approval rates
for women are 15 percent to 20 percent lower than for
men, according to a U.S. Senate report released last
year. Women business owners receive just 4 percent
18.8%
U.S. Loan Approval Rates
2013
11.7%
Source: Biz2Credit. Data is national.
Women-Owned Businesses
Male-Owned Businesses
21.5%
2014
15.3%
of all conventional business loans, $1 out of every $23
loaned.
Nationally, according to Biz2Credit, loan approval
rates for women are improving, 15.3 percent in 2014
compared to 11.7 percent in 2013, likely due to the
improving economy. However, those rates still lag approval
rates for men. In 2014, male-owned businesses
had loans approved at a rate of 21.5 percent, up from
18.8 percent in 2013. The improvement in loan approval
rates for women-owned businesses narrowed the gap
between the genders by 29 percent.
Even with SBA loans, which are designed for business
owners who may have trouble qualifying for a traditional
bank loan, women end up with fewer loans and
less money than their male counterparts. In fiscal 2014,
in the New York SBA district, women business owners
received 386 SBA-backed loans for $97.6 million, about
20 percent of the loans made that year and 12 percent
of the total dollars lent. 20 What’s not known, however,
is whether women receive a lower percentage of SBA
loans because fewer women apply or because they fail
to meet SBA underwriting standards.
The good news is that many more women are receiving
SBA-guaranteed micro loans, a program that
targets early stage businesses and borrowers with little
or no credit history as well as women and minority entrepreneurs
who don’t qualify for larger, conventional
loans. In 2014, woman-owned companies in the U.S.
received nearly 47 percent of the micro loans issued—
although they got only 38 percent of the dollars lent.
Alternative sources of capital are increasingly available,
including micro loans from nonprofit lenders or
advances from peer lending institutions. But they can
come with a high price tag: interest rates as high as 15
percent, compared to a top rate of around 8 percent on
the average SBA loan. They also require a strong business
case and a level of cash flow and creditworthiness
that takes time to build. All told, men start high-growth
businesses with nearly twice as much capital as women,
$135,000 vs. $75,000, according to a 2014 National
Women’s Business Council Report.
It’s true that many women entrepreneurs choose to
keep their businesses small so as to have time to handle
family responsibilities and other obligations, but even
those who want to grow struggle to do so. Janice Freder-
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