Women-owned businesses have taken great strides since the late 1970s. So much so, that between 1972 and 2007, these businesses have increased from 4.6 percent of all firms to almost 29 percent. The push to help women’s entrepreneurship really kicked in back in 1988 when Government signed the Women’s Business Ownership Act into law. The Women’s Business Ownership act eliminated the requirement of women to obtain the signature of a husband or other man as a prerequisite for a loan. Since that time, Women’s business-ownership grew from 4.1 million small businesses in 1987 to 8.6 million in 2013. By 2009 women-owned businesses had grown to become a $3 trillion economic force and supported 23 million jobs.
In the 21st century alone, the growth rate of women-owned businesses rose by 20 percent from 2002-2007. Additionally, women-owned businesses have added nearly 500,000 jobs between 1997 and 2007, while the rest of privately held firms lost jobs.
However, despite the progress that women business owners and entrepreneurs have experienced over the last few decades, they still face significant barriers. According to a recent report by U.S. Senator Maria Cantwell (D-WA), Chairwoman of the Senate Committee on Small Business and Entrepreneurship, women-owned business have had a more difficult time obtaining the necessary capital to grow their businesses.
According to the report, only 4.4 percent of small business loans go to women business owners. In fact, despite representing 30 percent of all small companies, just $1 out of every $23 lent to small businesses goes to a female entrepreneur. , The report also showed that women are more likely to be turned down for a small business loan, or received less favorable terms than men. Due to these challenges, women have been forced to rely on other means of capital like personal credit, loans from family and friends, or have needed to agree to higher interest rates in order to grow their businesses.
The report recommends three remedies to improve the business climate for women entrepreneurs:
- Modernize and expand the SBA’s Microloan Program to reach borrowers that need up to $50,000, and reauthorize the Intermediary Loan Program to allow more women to access capital between $50,000 and $200,000.
- Enact legislation that would allow sole-source contracting to women-owned businesses through the Women-Owned Small Business Procurement Program, which would give them the same access to federal contracts as other disadvantaged groups.
- Re-authorize the Women Business Center program, which issues grants to nonprofit organizations to provide specialized counseling and training, and increase funding to potentially help more women entrepreneurs, especially in low-income areas.
To learn more or to view the report go to the U.S. Senate Committee on Small Business and Entrepreneurship’s site.
Harvard study paints a bleak picture for post-recession small business lending with a technology silver lining
The Harvard Business School released a new paper* recently titled, “The State of Small Business Lending: Credit Access during the Recovery and How Technology May Change the Game.” The paper cites many examples of recessionary trends and paints a bleak picture of the post-recession lending environment for the 28 million small businesses in the U.S.
For example, the paper states that between 2007 and 2012, the small business share of total net job losses was about 60 percent. From the employment peak before the recession until its lowest point in March 2009, the number of jobs at small business fell by nearly 11 percent. By comparison payrolls at larger businesses shrank by about 7 percent. For companies with fewer than 50 employees, jobs declined 14.1 percent, compared to just 9.5 percent in businesses with 50-500 employees, while overall employment decreased 8.4 percent. Additionally, the paper stated that it is much harder for small firms to obtain access to capital than it is for large firms.
Despite the challenges small businesses face, the report noted that a broad range of alternative models are emerging post-recession in commercial finance, particularly in the larger dollar small business loan segment. These lending sources have proliferated through the recovery, further suggesting that either: businesses are forced to seek non-traditional credit, because traditional sources such as banks remain unwilling to lend, or that non-traditional lenders have found ways of providing capital to small firms with greater efficiency. For example, in alternative lending the outstanding portfolio balance is doubling every year, compared to a decline of about 3 percent in the traditional banking sector.
The growth of alternative lending is being driven in part by the way many of these alternative lenders are “innovating”, offering online and mobile applications, which can be completed in less than 30 minutes. In many cases, business owners can be approved in hours, and have the funds available in their account in just days, whereas in the conventional banking model, small business owners may not be approved for several weeks. The technology used by these alternative players is fundamentally changing many of the ways in which small businesses access capital, creating efficiencies, greater competition, price transparency and even making small business lending more profitable.
Data is limited on alternative lending, but Biz2Credit’s April 2014 index (which measures activity among accounts receivables financers, merchant cash advance lenders, CDFI’s and micro-lenders), notes that small business loan approval rates, run above 60 percent versus 17 percent for large banks, 51 percent for community banks and 45 percent for credit unions.
You can learn more by downloading a copy of the Harvard Business School paper from http://www.hbs.edu/
How small business owners spend time
The National Federation of Independent Businesses recently asked its members how they manage their time. Not surprisingly, most NFIB members surveyed said they spend most of their time simply keeping their businesses up and running. So what task do they spend the most time on each day?
Thirty-four percent of the time, small business owners said they were busy providing the services of their business, followed by 21 percent managing finances and 19 percent on communications. What was surprising, however, is that sales received only 13 percent of the owners focus, with managing employees, logistics and customer service making up the remaining 13 percent.
Additionally, while small business owners have the flexibility of setting their own schedule, NFIB members are not generous in giving themselves a break. The average vacation time taken is around 10 days, with 31.6 percent of members taking between one and five days off per year.
To learn more, visit NFIB.com.