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What if All Business Owners Had Fair and Equal Access to Credit?


Women are an economic powerhouse. In the U.S. alone, the latest data shows that women own 11.6 million firms, employ nearly 9 million people, and generate $1.7 trillion in revenues. Yet, history shows that women business owners have faced significant obstacles compared to men in their quest to obtain credit and secure investment.

At Fundbox, we set out to understand why. Our report, What If – Designing Fair and Equal Financial Access for Women, draws on a wide range of data largely derived from research and official government sources, to present a study of the challenges that female entrepreneurs face and the roadblocks to securing business funding. The report shines light on how the current system may be perpetuating a financial gap between men and women, and challenge the traditional process for determining creditworthiness.

Also in this report, we discuss how we in the business community and the financial industry can do better. Specifically, we look at how modern financial firms can and should smash these roadblocks to promote fairer funding for everyone.

The reality for female entrepreneurs

Throughout history, women have faced both legal and more subtle forms of discrimination. Only four decades ago in the 1970s, female business owners could be denied access to credit by banks if they were unmarried or denied a credit card if her husband was unwilling to sign for it.

Despite legislative changes, discrimination has persisted. Today, many women business owners still experience credit access denial in greater numbers than their male counterparts, in part due to factors like gender stereotypes and unequal pay.

Consider the following statistics:

  • Women are approved for fewer bank loans – Although women apply in similar rates to men, only 39% of women-owned firms had a conventional bank loan, while 52%of male-owned firms received conventional bank loans. (21st Century Barriers to Women’s Entrepreneurship (pdf), Senator Maria Cantwell).
  • Women business owners face more rejections than men do – Multiple studies indicate that women are more likely to be turned down for loans than men, and frequently receive loans with “less favorable terms” than men.  (U.S. Department of Commerce. “Women-Owned Business in the 21st Century”).
  • The loan denial rate for white women-owned firms is twice the rate experienced by men. Women seeking first-year financing to get their companies off the ground receive about 80 percent less capital than men in similar situations.  (Tackling the Gender Gap: What Women Entrepreneurs Need to Thrive (pdf), Senator Jeanne Shaheen).
  • Women start their firms with a smaller pool of funding – Women business owners receive only 77% of the financing that male business owners do. Up to 64% experience a shortfall early, discouraging growth and dampening revenues. Even among successful firms accumulating high earnings, women-owned firms received smaller loans than those with men at the helm. (U.S. Department of Commerce. “Women-Owned Business in the 21st Century.” 2010).
  • Small women-owned firms are also more likely to stay smallOnly 3% had receipts over $1 million, compared to 9% of all businesses. Further, the level of start-up capital available to these firms in the early stage of growth is a strong predictor of business success. For those women-owned companies which do manage to thrive despite (nearly) universal early financial obstacles and undercapitalization, we find funding gaps persist into later growth stages.

With limited access to funding through conventional channels, women may often look elsewhere to fund their ventures. A 2014 study by U.S. Senator Maria Cantwell reported that 44% of female entrepreneurs use private sources, such as personal savings, loans from family and friends, and even personal bank loans (11%).

What’s holding women back?

Many factors beyond gender discrimination work against some types of business owners more than others. We examined some of the factors impeding the success of women-owned businesses.

A key finding is that women fear they’ll be turned down when applying for credit (22% of women vs. 15% of men) in part because their lending needs are often below the $100,000 loan minimum that traditional banks require.

But perhaps most problematic for women is the traditional system of underwriting relies on credit scores alone to determine a borrower’s financial health. The gender pay gap means women accumulate fewer assets (a key credit score measure) than their male counterparts, a factor that can be a disadvantage when applying for a loan.

While systemic bias continues to negatively influence women entrepreneurs’ ability to access credit, evidence suggests that many women-owned businesses are more creditworthy than their male-owned counterparts. The financial services industry just doesn’t acknowledge it.

How Can We Do Better?

Despite these challenges, U.S. Census data shows that women-owned firms continue to grow,  up 26.8% from 2007 to 2012. In other words, though women have had many factors holding them back, they still grew businesses at a rate outpacing the population as a whole. This observation makes us wonder: how much more could female entrepreneurs accomplish if they encountered less structural bias?

The good news is that technology is fueling systemic change and stripping away much of the bias that is built into the current financial system that puts women business owners at a disadvantage.

Innovations in machine learning, artificial intelligence, and cloud computing usher in a new financial era in which business owners can access credit through decisions based on data that includes more than just their credit scores and income.

Our report explores how these tools can create a more accurate and holistic financial picture of any business’ finances.

The end result? A fairer future and a greater probability of business owners—regardless of gender or type—finding access to the right financial services and the right credit, at the right time.

The message is clear: don’t be dissuaded by the limitations of the current system or discouraged by your credit score. Explore all financing options available to you, including new fintech options which, as our report proves are already breaking down many of the barriers to women’s access to business credit.


This piece is brought to you by Fundbox, the first AI-enabled business capital platform designed to accelerate B2B commerce at scale.  With Fundbox, B2B sellers get paid right away and buyers get more advantageous terms. Fundbox is committed to financial inclusion so that all business owners have fair and equal access to credit.

Irene Malatesta

Irene Malatesta

Irene is a business content strategist for Fundbox, with over a decade of experience working with entrepreneurs and mission-driven businesses to bring their stories to life.

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