Is Online Loan The Answer For Women Entrepreneurs?

We have seen an unfortunately overwhelming amount of evidence that female employees earn less than their male counterparts. But what about the gap when it comes to securing financing for small businesses?

Not only are 25% of women likely to seek financing for their business (compared to 34% of male entrepreneurs), but the loans they get approved for are a third lower than that of men.

It is shocking, inexplicable and unacceptable.

The imbalance also exists in venture capital

But this problem doesn’t just happen in old-school banks: the venture capital industry is just as to blame. In 2018, investors invested $ 130 billion in American startups. Only 2.2% of that amount went to founders.

A study published in Harvard Business Review found that women fundraisers have different questions than men. For example, investors ask men how they will make money for the startup, but they ask women how they will avoid losing investor money. Why the gap?

Why do women get less funding?

This problem does not go unnoticed. Minority staff on the Senate Small Business and Entrepreneurship Committee produced a special report a few years ago titled “Tackling the Gender Gap: What Women Entrepreneurs Need to Thrive”.

They discovered several issues that made running a business difficult for women entrepreneurs, including:

  • Lack of role models and mentors.
  • Gender pay gap.
  • Unequal access to finance and venture capital.

These issues, combined with gender biases (conscious or unconscious) and the fact that women tend to get fewer raises and may have lower credit scores, mean that running and growing a business can be more difficult. for women.

A lucrative alternative

I am encouraged by the role that online lenders are playing in slowly changing the tides, and the role of my business in that. In the past few years alone, the fintech space has changed the way business owners find financing, from an opaque wall of reasons why a loan application has been turned down, to clear communication about loan requirements. qualification.

Yet, this is not the experience that we see through traditional lending avenues.

When a woman walks into a bank to talk to a banker or when she introduces her startup to investors, there can be gender bias, intentional or not. If she is denied a loan, despite being eligible, she can never really be sure that her gender played a role in that decision. In fact, 46% of female entrepreneurs in the United States have had exactly this experience.

But with online loans, the data speaks for itself. Online lenders take a look at how the business is run, how homeowners manage their funding, and how they pay their bills. The decision is based on numbers and analysis, not on prejudices against a person because of their gender, appearance, skin color, age or any other discriminatory factor.

Advice for women seeking funding

If you’re one of the 11.6 million female business owners in the United States, be confident when it comes to finding the right loan option for your business. Explore all of your options, not just the fruits on hand (which may turn out to be the more expensive option).

Also think about what you need the money for. If you just need a backup to cover quick expenses when cash flow is tight, a business credit card may be a good choice. If you’re looking to keep your head above water, especially in light of the COVID-19 pandemic we find ourselves in, consider one of the SBA’s economic stimulus options available under the CARE Act. .

This is not a decision to be taken lightly. Know how much you need and what your numbers look like.

As the FinTech industry increasingly understands the value of diving into small business lending, technology will play a bigger role in how entrepreneurs get financing. Inherent or implicit biases are removed. You eliminate the need to go to a bank for financing. As financing becomes digitized and data-driven, you eliminate this risk of gender bias and focus on the real purpose of the corporate finance industry: to help business owners – regardless of gender – get it right. the money they need to be successful.

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David A. Albanese