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Opinion Editorials

How banks systematically undercut women entrepreneurs

Women entrepreneurs are being poorly assessed by traditional banking, yet new research points out where banks’ assumptions are dead wrong.

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women in IT

Are banks sticking to bad habits?

Money doesn’t care who spends it — but, apparently, many banks do. In 2014, banks awarded only 4.0 percent of commercial loans to women entrepreneurs.

The previous year, financial institutions gave the green light to less than one-third of loan applications from women-owned businesses. That’s 15 to 20 percent lower than for male applicants.

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What gives? Banks are concerned that women-led companies typically have lower annual earnings, higher operating expenses, and lower credit scores. While that’s often true, it’s not because women are inferior managers. There’s no sex-related chromosome that gives males a more savvy business sense. The truth is that women are more likely to head up retail enterprises, which are simply more expensive to run.

Banks also believe that women are less likely to take business risks, so their growth potential is limited. But a two-year 2016 Canadian research study headed by Carleton University reports that women business owners aren’t afraid to speculate in order to help their businesses grow.

Banks have some erroneous ideas about female entrepreneurs. If banks examine their preconceptions, maybe they’ll make some changes. Not just for the sake of women, but for the benefit of the whole economy.

The uphill battle

Many banks have deep-rooted assumptions about what constitutes a “good risk.” Unfortunately, because of the nature of many womens’ businesses, they don’t traditionally fit into that category:

  • Collateral: Banks are big on collateral. You need some form of security to back up that loan. The trouble is, small businesses often don’t have much in the way of collateral, and women run about 30 percent of small and mid-sized companies. Many of these are e-commerce operations, so they don’t have real estate investments to put on the line. However, certain lending institutions let small business owners use personal property for collateral.
  • Comparatively low earnings: Over 65 percent of female-led businesses bring in less than $25,000 annually. Banks are concerned that companies with such modest revenues will be unable to pay back their loans. But there’s a reason why the word “small” is in the phrase “small business loan.” Income is somewhat limited, but the requested loan is generally proportional.
  • Unfinished homework: Some lenders are under the impression that women aren’t fully prepared for loan meetings. Paperwork is missing — so is confidence — and their monetary needs are not well reasoned. Certainly, some women fall into this category, but so do some men. Banks shouldn’t get caught generalizing again. Lack of readiness isn’t a gender-linked trait.

The Battleground

In order to build good relationships with women entrepreneurs, banks must recognize what these business owners bring to the table. These features are not insignificant:

  • Women typically have a different approach to risk-taking. When assessing opportunities and dangers, many components influence women, including economic factors, social success, external support, self-confidence and professional networks. Women consider multiple factors when making decisions about advancing their businesses. Growth is generally a long-term project, not a short-term goal.
  • Women are open to taking business risks. However, many banks have the opposite perception, and this impacts their lending process. But simply starting a business is a gamble. Between 1997 and 2015, the number of American female-owned businesses increased almost 75 percent. They popped up faster than new businesses operated by men. Who’s the risk-taker now?
  • Women are innovators. The Carleton study determined that between 2008 and 2011, female- and male-led businesses introduced innovations at about the same rate. These included new products, processes, marketing strategies and organization. The result of this cutting-edge work? Many women-run businesses noted that these changes increased their market shares significantly.

The road to victory

Currently, a lot of women forego attempts at traditional loans. Though sometimes they avoid banks because of prior negative ­— even humiliating — experiences, many women are unaware of potential funding opportunities that are available at lending institutions.

Women often start their businesses with personal funds or loans from family members and friends. Women want to retain control of their operations, so they often avoid investors and venture capitalists. However, hands-on, involved partners bring both expertise and money to the business.

Once banks understand that women are capable — yet sometimes different — business owners, the two groups might improve and expand their relationship. The loan process should be more accessible for small business owners who may have limited commercial experience. The end goal is an alliance where the bank is not simply a moneylender but an entity that works to help the business succeed.

Most women are committed to their businesses for the long haul and seek sustained growth rather than quick profits.

Women’s businesses bring in more than $1 trillion each year. When compared to all businesses, they’re expanding one and a half times faster. With that track record, banks, as well as venture capital funds, angel investors and small lending institutions, should rethink their positions. Imagine it: a future where funding women entrepreneurs is the norm rather than the exception.

#Funding

Kayla Matthews is a writer who is dedicated to the overlap between technology and productivity. When she isn't writing at The American Genius, she can be found on MakeUseOf and The Huffington Post.

Opinion Editorials

Sci-fi alert: Building cities on quantum networks becoming reality

(OPINION / EDITORIAL) The University of Bristol’s Quantum Engineering Tech Lab has created quantum networks that demonstrate the possibilities for future cities.

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Quantum network connections in theoretical city at night time.

The University of Bristol is home to the largest quantum entanglement-based computer network in the world. Its Quantum Engineering Technology Lab, led by Dr. Siddarth Joshi, has been spearheading the development of a method of encryption called Quantum Key Distribution that may soon revolutionize information security.

First, what is quantum computing, exactly? (Giving a concise answer to that question is sort of like nailing jelly to a wall, but here goes…)

Much like a light switch, a conventional computer circuit can only be in one of two states at a time: On (1) or off (0). That’s basically how binary code works – by representing information as a series of discrete on and off signals, or high and low energy states.

Quantum computing makes use of a third kind of state that exists between those two.

Think about it this way: If classical, binary computing models rely on energy states of “yes” and “no” to communicate data, quantum computing introduces a state of “maybe.” This is because at the quantum level, the photons that make up the information in a quantum computer can exist in multiple places (or energy states, if you prefer) at once – a phenomenon known as “entanglement.”

Entangled photons cannot be observed or measured (i.e., tampered with) without changing their state and destroying the information they contain. That means quantum computer networks are virtually hack proof compared to traditional networks.

This is where Dr. Joshi’s team is changing the game. While previous attempts to build a secure quantum computer network have been limited to just two machines, the QET Lab has been able to establish a quantum encrypted network between eight machines over a distance of nearly eleven miles.

As Dr. Joshi puts it, “until now, building a quantum network has entailed huge cost, time, and resource, as well as often compromising on its security which defeats the whole purpose. […] By contrast, the QET Lab’s vision is scalable, relatively cheap and, most important of all, impregnable.”

If it can be successfully scaled up further, quantum encryption has countless potential civic applications, such as providing security for voting machines, WiFi networks, remote banking services, credit card transactions, and more.

In order for an entire population to be able to utilize a quantum network, fiber optic infrastructure must first be made accessible and affordable for everyone to have in their homes. In that sense, quantum cities are still roughly two decades away, posits Dr. Joshi. The technology behind it is very nearly mature, though. A simpler application of quantum encryption is practically right around the corner – think quantum ATMs in as few as five years.

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Opinion Editorials

5 ways to grow your entrepreneur business without shaming others

(OPINION / EDITORIAL) We all need support as business owners. Let’s talk ideas for revenue growth as an entrepreneur that do not include shaming your competition.

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Entrepreneur women all talking around a meeting table.

The year 2020 has forced everyone to re-assess their priorities and given us the most uncertain set of circumstances we have lived through. For businesses and entrepreneurs, they were faced with having to confront new business scenarios quickly. Maybe your entrepreneur business was set to thrive as behaviors changed (maybe you already offered contactless products and services). Or, you were forced to add virtual components or find new revenue streams – immediately. This has been tough.

Every single person is having a hard time with the adjustments and most likely at different stages than others. We’re at the 6-month mark, and each of our timelines are going to look different. Our emotions have greeted us differently too, whether we have felt relief, grief, excitement, fear, hope, determination, or just plain exhaustion.

Now that we are participating in life a bit more virtually than in 2019, this is a good time to re-visit the pros and cons of the influence of technology and marketing outreach online. It’s also a great time to throw old entrepreneur rules out the window and create a better sense of community where you can.

Here’s an alluring article, “Now Is Not the Time for ‘Mom Shaming’”, that gives an example from about a decade ago of how the popularity of mommy bloggers grew by women sharing their parenting “hacks”, tips, or even recipes and crafting ideas via online posts and blogs. As the blog entries grew, so did other moms comparing themselves and/or feeling inadequate. Some of the responses were natural and some may have been coming from a place of defensiveness. Moms are not alone in looking for resources, articles, materials, and friends to tell us we’re doing ok. We just need to be told “You are doing fine.”

Luckily, some moms in Connecticut decided to declare an end to “Mom Wars” and created a photo shoot that shared examples of how each mom had a right to their choices in parenting. It seemed to reinforce the message of, “You are doing fine.” I don’t know about you, but my recent google searches of “Is it ok to have my 3-year old go to bed with the iPad” are pretty much destined to get me in trouble with her pediatrician. I’m hoping that during a global pandemic, “I am doing fine.”

Comparing this scenario to the entrepreneur world, often times your business is your baby. You have worn many hats to keep it alive. You have built the concept and ideas, nurtured the products and services with sweat, tears, and maybe some laughs. You have spent countless hours researching, experimenting, and trying processes and marketing tactics that work for you. You have been asked to “pivot” this year like so many others (sick of that word? Me too).

Here are some ideas for revenue growth as an entrepreneur (or at least, ideas worth considering if you haven’t already):

  1. It’s about the questions you ask yourself. How does your product or service help or serve others (vs. solely asking how do I get more customers?) This may lead to new ideas or income streams.
  2. Consider a collaboration or a partnership – even if they seem like the competition. “If you want to go fast, go alone. If you want to go far, go together.” – African proverb
  3. Stop inadvertently shaming the competition by critiquing what they do. It’s really obvious on your Instagram. Try changing the narrative to how you help others.
  4. Revisit the poem All I Really Need to Know I Learned in Kindergarten and re-visit it often. “And it is still true, no matter how old you are – when you go out into the world, it is best to hold hands and stick together.”
  5. Join a community, celebrate others’ success, and try to share some positivity without being asked to do so. Ideas include: Likes/endorsements, recommendations on LinkedIn for your vendor contacts, positive Google or Yelp reviews for fellow small business owners.

It seems like we really could use more kindness and empathy right now. So what if we look for the help and support of others in our entrepreneurial universe versus comparing and defending our different way of doing things?

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Opinion Editorials

Can we combat grind culture and injustice with a nap?

(OPINION EDITORIALS) A global pandemic and a climate of racial injustice may require fresh thinking and a new approach from what grind culture has taught us.

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Sleeping cat with plant, fighting grind culture.

Information is delivered to us at warp speed with access to television, radio, and the internet (and more specifically, social media). We are inundated with messages. Oftentimes they’re personalized by something that a friend or family shared. Other times we manage them for work, school, or just keeping up with news. Many entrepreneurs already wear many hats and burn the midnight oil.

During this global pandemic, COVID-19, we have also seen a rise in awareness and attention to social injustice and systemic racism. This is not a new concept, as we all know. But it did feel like the attention was advanced exponentially by the murder of George Floyd on Memorial Day 2020. Many people and entrepreneurs felt called to action (or at least experienced self-reflection). And yet they were working at all hours to evolve their businesses to survive. All of this happening simultaneously may have felt like a struggle while they tried to figure out exactly they can do.

There are some incredible thought leaders – and with limited time, it can be as simple as checking them out on Instagram. These public figures give ideas around what to be aware of and how to make sure you are leveling up your awareness.

Dr. Ibram X. Kendi, Director of the Center for Antiracist Research – he has been studying anti-racism and has several books and interviews that help give language to what has been happening in our country for centuries. His content also delves into why and how white people have believed they are more than people of color. Here is a great interview he did with Brené Brown on her Unlocking Us podcast.

Tamika Mallory – American activist and one of the leading organizers of the 2017 Women’s March. She has been fighting for justice to be brought upon the officers that killed Breonna Taylor on March 13. These are among other efforts around the country to push back on gun control, feminist issues, and the Black Lives Matter movement.

Brené Brown – research professor at the University of Houston and has spent the last two decades studying courage, vulnerability, shame, and empathy. She has been listening and engaging on how racism and our shame intersect. She also speaks about how people can reflect on themselves and where they can take action to better our society. She has some antiracism resources on her website.

With all of this information and the change in our daily routines and work habits (or business adjustments), what is a fresh approach or possibly a new angle that you haven’t been able to consider?

There is one social channel against grind culture that may not be as well-known. At an initial glance, you may even perceive this place as a spoof Twitter and Instagram that is just telling you to take a nap. But hold on, it’s actually much smarter than that. The description says “We examine the liberating power of naps. We believe rest is a form of resistance and reparations. We install Nap Experiences. Founding in 2016.”

It might be a great time for you to check out The Nap Ministry, inspired by Tricia Hersey. White people are called to action, and people of color are expressly told to give time to taking care of themselves. Ultimately, it goes both ways – everyone needs the time to recharge and recuperate. But people of color especially are being told to value their rest more than the grind culture. Yes, you’re being told you need to manage your mental health and include self-care in your schedule.

Through The Nap Ministry, Tricia “examines rest as a form of resistance by curating safe spaces for the community to rest via Collective Napping Experiences, immersive workshops, and performance art installations.”

“In this incredibly rich offering, we speak with Tricia on the myths of grind culture, rest as resistance, and reclaiming our imaginative power through sleep. Capitalism and white supremacy have tricked us into believing that our self-worth is tied to our productivity. Tricia shares with us the revolutionary power of rest.” They have even explored embracing sleep as a political act.

Let this allow you to take a deep breath and sigh – it is a must that you take care of yourself to take care of your business as well as your customers and your community. And yes, keep your drive and desire to “get to work”. But not at your expense for the old grind culture narrative.

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