A recent credit company study revealed that women appear to face more obstacles when it comes to securing a small business loan. The research examined 14,000 small business loan applications during the six months leading up to the end of 2012 and found female small business owners faced more costly operations, smaller profit margins, and an overall more difficult time securing loans for their businesses.
One of the reasons for this is the fact that women were more likely to open businesses that involved retail – an industry that traditionally is more expensive to operate and gets less of a return on investment. As a result, women-owned businesses typically have operating expenses that are 21 percent higher than male-owned businesses and earn 15 percent lower yearly income than their male counterparts. In addition, these factors affected women’s credit ratings negatively, which resulted in female business owners having a credit score 40 points lower than male business owners.
All these factors result in female business owners having a tougher time securing funding for their company. The study concluded that the small business approval rate for women is 15 to 20 percent lower than that among male business owners.
According to BusinessWeek, getting turned down for a loan can put business owners in a negative tailspin, as it causes them to rely more heavily on using credit cards for leverage, acquire more debt and increase their chances of getting a ding on their credit scores. Ultimately, this cycle results in a lower return on investment and more financial stress.
Forbes magazine reports women-owned businesses represent 50 percent of privately held companies in the United States today – quite an improvement from 25 years ago, when only 10 percent of U.S. businesses were owned by women.
Forbes reports that many female entrepreneurs did not grow their businesses as much as they could because they did not have employees, which is a big impediment to financial growth. In addition, the article states, many women limit their vision and opportunities by declining opportunities for more clients or more work because they are so strapped for time. The article recommends that rather than turning down more clients or project opportunities, women find people to help them get more done. More female business owners may benefit from thinking about creative approaches to financing, instead of choosing not to do projects, Forbes said.