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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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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

The truth about unemployment from someone who’s been through it

(EDITORIAL) Unemployment benefits aren’t what you thought they were. Here’s a first-hand experience and what you need to know.

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Have I ever told you how I owed the government over two grand because of unemployment in 2019, and only just finished paying it back this year?

This isn’t exactly the forum for memoirs, but this is relevant to everyone. So I’ll tell y’all anyway.

It all started back in 2018 when I came into work early, microwaved my breakfast, poured coffee, and got pulled into a collaboration room to hear, “We love you and your work, April, but we’ve been bought out and you’re being laid off.”

It was kind of awkward carrying my stuff out to the car with that Jimmy Dean sandwich in my mouth.

More awkward still was the nine months of unemployment I went through afterwards. Between the fully clothed shower crying, the stream of job denial, catering to people who carried rocks in their nostrils at my part-time job (yes, ew, yes, really), and almost dying of no-health-insurance-itis, I learned a lot!

The bigger lesson though, came in the spring of the following year when I filed my taxes. I should back up for a moment and take the time to let those of you unfamiliar with unemployment in Texas in on a few things that aren’t common knowledge.

1: You’re only eligible if you were laid off. Not if you had quit. Not fired. Your former company can also choose to challenge your eligibility for benefits if they didn’t like your face on the way out. So the only way you’re 100% guaranteed to get paid in (what the state calls) “a timely manner”, is a completely amicable split.

2: Overpayments have to go back. Immediately. If there’s an error, like several thousand of Texans found out this week, the government needs that cash back before you can access any more. If you’re not watching your bank account to make sure you’re getting the exact same check each time and you have an overpayment, rest assured that mistake isn’t going to take long to correct. Unfortunately, if you spent that money unknowingly–thought you got an ‘in these uncertain times’ kinder and gentler adjustment and have 0 income, you have a problem. Tying into Coronavirus nonsense is point three!

3: There are no sick days. If ever you’re unable to work for any reason, be it a car accident, childbirth, horrible internal infection (see also no-health-insurance-itis), you are legally required to report it, and you will not be paid for any days you were incapacitated. Personally, my no-health-insurance-itis came with a bad fever and bedrest order that axed me out of my part time job AND killed my unemployment benefits for the week I spent getting my internal organs to like me again. But as it turned out, the payment denial came at the right time because–

4: Unemployment benefits are finite. Even if you choose to lie on your request forms about how hard you’re searching for work, coasting is ill-advised because once the number the state allots you runs out…it’s out. Don’t lie on your request forms, by the way. In my case, since I got cut from my part-time gig, I got a call from the Texas Workforce Commission about why my hours were short. I was able to point out where I’d reported my sickness to them and to my employer, so my unpaid week rolled over to a later request date. I continued to get paid right up until my hiring date which was also EXACTLY when my benefits ran out.

Unemployment isn’t a career, which is odd considering the fact that unemployment payments are qualified by the government as income.

Ergo, fact number five…

5: Your benefits? They’re taxed.

That’s right, you will be TAXED for not having a job.

The stereotype of the ‘lazy unemployment collector burdening society’ should be fading pretty quickly for the hitherto uninformed about now.

To bring it back to my story, I’d completely forgotten that when I filed for unemployment in the first place, I’d asked for my taxes NOT to be withheld from it–assuming that I wasn’t going to be searching for full time work for very long. I figured “Well, I’ll have a tax refund coming since I’ll get work again no problem, it’ll cancel out.”

Except, it was a problem. Because of the nine month situation.

I’d completely forgotten about it by the time I threw myself into my new job, but after doing my taxes, triple checking the laws and what I’d signed, it was clear. Somehow…despite being at my lowest point in life, I owed the highest amount in taxes, somewhere around the 2k mark.

Despite being based on a system that’s tied to how much income you were getting before, and all the frustrating “safeguards” put in place to keep payments as low and infrequent as possible, Uncle Sam still wants a bite out of the gas-station Hostess pie that is your unemployment check. And as I’m writing this, more and more people are finding that out.

I’d like to end this on a more positive note…so let’s say we’ve all been positively educated! That’s a net gain, surely.

Keep your heads up, and masked.

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Opinion Editorials

COVID-19 acts are unfortunately too short sighted

(BUSINESS NEWS) The biggest flaw in the CARES act is simply that it won’t last. Numerous issues have extended the life of COVID-19 but the act hasn’t matched it.

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The CARES act gives an additional $600 weekly to those on unemployment assistance. The idea being that, combined with the $380 already granted by unemployment, the payments would roughly equal the wage of the average worker prior to the pandemic- about $1,000 weekly.

But on July 31st, the expansion that CARES provides will expire, and benefits will return to pre-pandemic amounts. Those currently receiving the maximum payment will see a 61% decrease in their income. In states that offer lower benefit payments, that percentage goes even higher. All of this comes during a national rental crisis, and moratoriums on evictions across the country are also nearing their ends or being extended last minute.

This isn’t the first or only “yuge” hole in the federal government’s COVID-19 safety net. Many Americans (this writer included) have seen neither hide nor hair of their promised stimulus checks. The HEROES act, which is being billed as a second round of stimulus money, remains under debate- as it has been for several weeks.

And the Families First Coronavirus Response Act, which requires certain businesses to provide two weeks of paid leave to workers who may be sick (or caring for someone who is) has plenty of problems too, namely the laundry list of exceptions to it.

This is just the most recent push to return to the pre-virus economy before effective protective measures have been put in place for workers and consumers alike. After all, with cases of COVID-19 spiking again in the US, it’s apparent that the act is still absolutely necessary. Our lawmakers either lack patience, or compassion – take your pick. Frankly, I say it’s both.

Not only have countless health experts warned that reopening too early will be disastrous, but if a second lockdown is in our future, all of the time, money, and human lives that went into reopening will be wasted.

There is a silver lining among the storm clouds on the horizon. Because ballooning unemployment has created long wait times for benefit applicants, unemployment assistance programs are shelling out retroactive back payments to those deemed eligible.

Good news, at least, for laid off workers who have been waiting months to hear their fate.

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Opinion Editorials

Women-owned businesses make up 42% of all businesses – heck yeah!

(EDITORIAL) Women-owned businesses make a huge impact on the U.S economy. They make up 42% of all businesses, outpace the national growth rate by 50%, and hire billions of workers.

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Women entrepreneurs make history in the U.S as female-owned businesses represent 42% of all businesses, while continuing to increase at DOUBLE the national growth rate!

Women are running the world, and we are here for it! The 2019 American Express State of Women-Owned Businesses Report, states 13 million women are now self-employed entrepreneurs. From 2014 to 2019, women-owned businesses grew 21%. Think that’s impressive? Well, businesses owned by women of color grew 43% within the same timeframe, with a growth rate of 50%, and currently account for 50% of all women-owned businesses! Way to go! What this also means is that women employ over 2.4 million workers who together generate $422.5 billion in revenue.

What can we learn from these women that’ll help you achieve success in your businesses?

  1. Get informed: In a male-dominated business industry, women are often at a disadvantage and face multiple biases. So, know your stuff; study, research, and when you think you know it all…dig deeper!
  2. Stay hungry: Remember why you started this journey. Write down notes and reminders, goals, and inspirations, hang them up and keep them close.
  3. Ask for advice: Life is not meant to go through alone, so ask questions. Find a mentor and talk to people who have walked a similar path. Learning from them will only benefit your business.

Many of these women found ways to use their passion to drive their business. It may not be exactly what they thought it would be when they started out, but is it ever? Everyone has to start off small and rejection is part of the process. In fact, stories of rejection often serve as inspiration and encouragement to soon-to-be self starters.

Did you know J.K Rowling’s “Harry Potter” book was turned down TWELVE times? Seven books later with over 400 million copies sold, the Harry Potter brand is currently valued at over 15 billion. While you might not become a wizard-writing fantasy legend like J.K Rowling, you sure as heck can be successful. So go for it, and chase your dreams.

If you want to support women-owned businesses, start by scrolling through Facebook or doing some research to find women-owned businesses in your community. Then, support by buying or helping to promote their products. Small businesses, especially women-owned, black women-owned, and women of color-owned, are disproportionally affected by the current economic crisis ignited by a health pandemic. So if you can, shop small and support local. And remember, there’s a girl (or more) doing a happy dance when you checkout!

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