Here’s the good news: The number of women-owned businesses grew an amazing 45% over the last 10 years, which is 5x faster than the national average.
But the bad news is that the funding for these women-led businesses has not grown to keep up with it. In fact, the funding gap for female entrepreneurs is actually worse than the wage gap for female employees.
Here is a deeper dive into the barriers women-led businesses are still facing.
Starting With Less
A woman-led business definitely faces an uphill battle, and typically starts out with far less. For example, roughly nearly 3 out of 4 women-led small businesses will launch with less than $5,000 in start-up capital. Meanwhile, only about 55% of male-led businesses start with less than $5,000 in the bank.
Meanwhile, 68% of women entrepreneurs have to start their business from their home, compared to less than half of male entrepreneurs.
Simply put, female-led businesses have to start out with less, and work harder to get what they need.
Big Banks Still Present Big Barriers
Going through a major bank is one of the most difficult ways for any entrepreneur to get funding. The process is very automated and formula based these days, so if your numbers don’t add up, you’re not getting a loan or a line of credit. This is why 8 out of every 10 small business loan applications are denied.
The numbers are even less promising for female entrepreneurs, who are only getting a shocking 16% of all conventional small business loans. At the same time, the dollar amount they are getting approved for is considerably lower than their male counterparts.
Exploring Alternative Funding Options
If going through a major bank or the SBA is not an option, female entrepreneurs have to look for less-known or “hidden” funding options, such as working with a company like Payvant Capital to get the money they need to grow their business.
These companies are more focused on a would-be business’ future, instead of their past. They offer options such as the merchant cash advance, which gives the business owner an advance of cash in exchange for a small percentage of their future income. A business can qualify as long as they have:
1. Been in business for 6 months or longer
2. $10,000 (or more) in monthly transactions
This can be an excellent source of emergency funding, as the process can be done completely online, with applicants receiving an answer within 24 hours.
The playing field is clearly not level. Female-led businesses are still facing major barriers, as the typical woman is far more likely to have to launch her business from her home with less than $5,000 in start-up money, while she is less likely to get a small business loan.
However, don’t feel overwhelmed by these numbers. Despite the hurdles they face, women are launching successful businesses every single day. They’re forced to be more creative and nimble when it comes to financing, but they are defying the odds and becoming success stories.
What will it take for you to become one?