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With almost 8 million women-owned businesses in the U.S., more female entrepreneurs are making an impact and growing at a rapid pace. However, some women are struggling to obtain the funds needed to start and maintain a successful business.
Although more women are owning small businesses, the struggle to receive a loan from a financial institution has been going on for a long time. Thanks to the Women’s Business Ownership Act of 1988, the few states that required husbands or other male relatives to be co-signers on business loans are no longer allowed to do so. But according to the Biz2Credit lending marketplace website, the approval rates for women’s business loan approvals is only between 15 and 20 percent.
The reasons why many women are declined from receiving a business loan vary from the way they present themselves at a bank to not having enough funds to convince a bank that they are able to pay back their debts. Moreover, some women lack confidence to show why they need the loan and how their projected profits can eliminate the debt.
A few ways women can increase their chances of getting a loan is by having the correct documents and financial statements before stepping foot into a bank as well as making sure their credit score is in good shape. Although women improved their credit score by 40 points in 2012, men typically have a 20 point advantage in their credit score over women, according to the Biz2Credit website.
The government regulations brought on by the financial crisis in 2008 made banks more hesitant to give out loans and more judgmental of the people applying for them. Since banks are closely examined by the Federal Deposit Insurance Corp., they need to show that they are cautious lenders and pick and chose which business owners are able to pay back a loan.
The lack of women receiving business loans is being noticed. In July of this year, a bill by members of the Senate Small Business & Entrepreneurship Committee was introduced, which would accept more Small Business Administration loans, up to $200,000, for women business owners. Additionally, women owners would have more flexible loan terms.