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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 secret to self improvement isn’t always about improvements

(EDITORIAL) Self improvement and happiness go hand in hand, but are you getting lost in the mechanics of self improvement?

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Think back to your New Year’s resolutions. Now that it’s summer, how many of them are you still keeping? Think about which ones stuck and what went by the wayside.

If you’re like most of us, you had big plans to make yourself better but didn’t stay the course. I’ve only managed to keep one of my resolutions, but it isn’t always easy.

I want to take a look at why we can’t keep our goals. I think we’re always on a journey of self-improvement. It’s easy to get obsessed with reading self-help books or trying to learn new things. We want to be better. This spring, I went through a Lent study with a group of people. Lent is a time of growth and self-reflection, just six weeks. And yet many of us are struggling to keep up with the daily reading or maintaining a fast of something we willingly chose to give up.

Why do we fail?

I think we fail because of three things.

You might think I’m going to say something like we fail because we don’t have willpower, but I think that is the farthest thing from the truth. I’m no therapist, but I’ve read the literature on alcohol and drug rehab. It’s not willpower that keeps a person sober. It’s community. One reason I think we fail at our goals is that we don’t have a cheerleading team. I believe that we need people on our side when we’re trying to improve.

Secondly, I think we fail because we want immediate results. We have this mentality that things should happen quickly. I’ve written about this before. It’s like you workout once and want that swimsuit body. We get frustrated when we don’t see results right away. So, we move on to the next pursuit.

Do your goals lead to happiness?

Failure can also be because self-improvement goals don’t always lead to being better person. We do a lot of things because “we should.” Your doctor might think you need to lose weight. Maybe your boss wants you to be a better speaker. Meditation should make you a better person. Maybe you ran a marathon, and now you think you need to run an ultramarathon because that’s what your best friend did.

What makes you happy isn’t always what you should be doing.

Your doctor might be right, but if you’re choosing to lose weight because you want to make your doctor happy, you’re probably not going to stick with a program. If you’re trying to learn Spanish to make your boss happy, again, you’re probably not going to enjoy it enough to really learn. If you’re chasing after goals just to say you’ve done it, what value do your achievements bring to your life?

If you’re obsessed because you “should” do something, you’re going to get burned out and fail. Whether it’s New Year’s resolutions, a self-improvement project or giving up meat for Lent, you need solid reasons for change. And if you give something a try that isn’t for you, don’t soldier on. You don’t need to spend years taking yoga classes if you don’t enjoy it.

When something becomes a burden rather than bringing benefits, maybe it’s time to take a look at why you’re doing it.

When you don’t know why you’re knocking yourself out to be better, maybe you need to figure out a reason. And if you feel as if what you’re doing isn’t enough, stop and figure out what will satisfy you.

I’ve been doing a lot of meal prepping on the weekends. Sometimes, I want to quit. But it pays off because I have less to do throughout the week. It might seem like a burden, but the benefits outweigh the burdens. I’ve been able to eat much healthier and use more vegetables in my meals, which is the one goal I’ve been able to keep. I have some good friends that help me stay on track, too. I choose to eat more vegetables for my health. I think it’s a combination of all these things that is helping me meet my goal this year.

Don’t give up on making yourself a better person. Just don’t become obsessed over the program. Look at the outcome. Are you pursing happiness on a treadmill or are you really working to find happiness?

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Opinion Editorials

What I wish I knew about finances in my 20s

(EDITORIAL) They say money makes the world go round. So, let’s discuss how to be smart with finances before it’s too late.

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Being in my early twenties, something I’m still getting used to is the fact that I’m making my own money. This is not to be confused with the babysitting money I was making 10 years ago.

Twice a month is the same routine: I get my paycheck and think, “Wooo! We goin’ out tonight!” but then I snap back to reality and think about what that money needs to be put towards. The smallest part of it going towards fun.

It’s been tricky to really start learning the ins and outs of finances. So, I do what I usually do in any type of learning process? I ask for advice.

I used to be fixated on asking those more advanced in age than I what they wish they knew when they were my age. Now that I’m determined to learn about finances, that question has been altered.

I reached out to a few professionals I know and trust and they gave me solid feedback to keep in mind about building my finances, about what they wish they had known in their 20s. However, I don’t think this only applies to those just starting out, and may be helpful for all of us.

“It’s important to simply know the value of money,” says human resource expert, Nicole Clark. “I think once you start earning your own money and are responsible for your housing, food, etc. you realize how valuable money is and how important it is to budget appropriately and make sure you’re watching your spending.”

Law firm executive director, Michael John, agrees with Clark’s sentiments. “I wish I had kept the value of saving in mind when I was younger,” explains John. “But, still remembering to balance savings while rewarding yourself and enjoying what your efforts produce.”

There are so many aspects of finance to keep in mind – saving, investing, budgeting, retirement plans, and so on and so forth.

In addition to suggesting to spend less than you make and to pay off your credit card in full each month, Kentucky-based attorney, Christopher Groeschen, explained the importance of a 401k.

“Every employee in America should be contributing everything they can into a 401k every year, up to the current $18,000 maximum per person,” suggests Groeschen.

“401ks present an opportunity for young investors to 1) learn about investing and 2) enter the market through a relatively low-risk vehicle (depending on your allocations),” he observes.

“An additional benefit is that 401ks also allow employees to earn FREE MONEY through employer matches,” he continues. “At the very least, every employee should contribute the amount necessary to earn the employer match (usually up to 4%) otherwise, you are giving up the opportunity to earn FREE MONEY. Earning FREE MONEY from your employer that is TAX FREE is much more important than having an extra Starbucks latte every day.”

Whether we like it or not, money is a core aspect of our daily lives. It should never be the most important thing, but we cannot deny that it is, in fact, an important thing. It’s tricky to learn, but investing in my future has become a priority.

This editorial was first published in May 2018.

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Opinion Editorials

How strong leaders use times of crises to improve their company’s future

(EDITORIAL) We’re months into the COVID-19 crisis, and some leaders are still fumbling through it, while others are quietly safeguarding their company’s future.

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Anthony J. Algmin is the Founder and CEO of Algmin Data Leadership, a company helping business and technology leaders transform their future with data, and author of a new book on data leadership. We asked for his insights on how a strong leader can see their teams, their companies, their people through this global pandemic (and other crises in the future). The following are his own words:

Managers sometimes forget that the people we lead have lives outside of the office. This is true always, but is amplified when a crisis like COVID-19 occurs. We need to remember that our job is to serve our teams, to help them be as aligned and productive as possible in the short and long terms.

Crises are exactly when we need to think about what they might be going through, and realize that the partnership we have with our employees is more than a transaction. If we’ve ever asked our people to make sacrifices, like working over a weekend without extra pay, we should be thinking first about how we can support them through the tough times. When we do right by people when they really need it, they will run through walls again for our organizations when things return to normal.

Let them know it’s okay to breathe and talk about it. In a situation like COVID-19 where everything is disrupted and people are now adjusting to things like working from home, it is naturally going to be difficult and frustrating.

The best advice is to encourage people to turn off the TV and stop frequently checking the news websites. As fast as news is happening, it will not make a difference in what we can control ourselves. Right now most of us know what our day will look like, and nothing that comes out in the news is going to materially change it. If we avoid the noisy inputs, we’ll be much better able to focus and get our brains to stop spinning on things we can’t control.

And this may be the only time I would advocate for more meetings. If you don’t have at least a daily standup with your team, you should. And encourage everyone to have a video-enabled setup if at all possible. We may not be able to be in the same room, but the sense of engagement with video is much greater than audio-only calls.

We also risk spiraling if we think too much about how our companies are struggling, or if our teams cannot achieve what our organizations need to be successful. It’s like the difference in sports between practice and the big game. Normal times are when we game plan, we strategize, and work on our fundamentals. Crises are the time to focus and leave it all on the field.

That said, do not fail to observe and note what works well and where you struggle. If you had problems with data quality or inefficient processes before the crisis, you are not fixing them now. Pull out the duct tape and find a way through it. But later, when the crisis subsides, learn from the experience and get better for next time.

Find a hobby. Anything you can do to clear your head and separate work from the other considerations in your life. We may feel like the weight of the world is on our shoulders, and without a pressure release we will not be able to sustain this level of stress and remain as productive as our teams, businesses, and families need us.

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