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Business Finance

Women-owned businesses less likely to get loan approval

Ladies, let’s face it – lenders just aren’t that into you. Don’t take it personally, there’s an explanation, and it isn’t because of your gender. At least that’s what a new study says.

small business woman

women-owned businesses

Women-owned businesses struggle to obtain loans

A recent report published by Biz2Credit, credit marketplace connecting small- and medium-sized businesses with lenders and service providers, highlighted a huge difference in the rate at which women-owned businesses are approved for business loans in comparison to businesses run by men. Results show that, on average, loan approval rates for women-owned businesses are 15-20 percent lower than those of male-owned businesses.

[pl_blockquote pull=”right” cite=”Biz2Credit”]
Women-owned businesses
report average annual
revenues that are 15%
lower than those run
by men, and average
operating expenses
that are 21 % higher.

[/pl_blockquote]Additionally, women-owned businesses report average annual revenues that are 15 percent lower than those run by men, and female-run businesses average operating expenses that are 21 percent higher than male-owned businesses. These numbers indicate that women spend more money than men when running their companies, yet have lower sales numbers to show for it; on top of that, lenders are less likely to extend female owners a loan because the average credit scores of women-owned businesses are 40 percent lower than male-owned businesses.

Biz2Credit analyzed approximately 14,000 loan applications from businesses in the U.S. in order to compile these metrics, specifically looking at applications from June through December of 2012.

So why does it matter who owns the business?

Why the reason for the disparities? Biz2Credit cites the nature of the industry that many women-owned businesses tend to operate in. “Women tended to be more involved in retail operations, which generally have higher operating expenses and smaller margins,” said Rohit Arora, CEO of Biz2Credit, one of the nation’s top small business finance experts, who oversaw the research. “Banks look at these figures and thus find women-owned businesses more risky to fund, which accounts for the lower loan approval rates for women.”

[pl_blockquote pull=”right” cite=”Rohit Arora”]
“Women tended to be more involved
in retail operations, which
generally have higher operating
expenses and smaller margins.”
[/pl_blockquote]When female business owners are denied loan funding, they often have to turn to personal credit cards or other quick funding options to take care of expenses, which can adversely affect both their personal credit and the credit of the business. All of these factors create a vicious cycle that can make it difficult to operate profitably and bring in revenues similar to a male-owned business.

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Destiny Bennett is a journalist who has earned double communications' degrees in Journalism and Public Relations, as well as a certification in Business from The University of Texas at Austin. She has written stories for AustinWoman Magazine as well as various University of Texas publications and enjoys the art of telling a story. Her interests include finance, technology, social media...and watching HGTV religiously.

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