6 ways in which accessing finance is different for women
Female entrepreneurs access finance for their business less. Prowess 2.0’s Erika Watson reveals where gender makes a difference
Women are just as likely to build successful businesses as men are. That is, if they have access to similar amounts of start-up investment. But the fact that women’s ventures start with an average of around one-third of the level of funds that men running similar types of business do, means they are less likely to thrive.
Most types of business finance have a surprising women’s angle. Understanding this could help more women make the most of the funds out there. Here are 6 ways accessing finance is different for women:
1. Small Grants
Women do better on the whole in accessing small grants, according to the Global Entrepreneurship Monitor. Anecdotally funders say that they find women tend to be a lot more thorough and detailed in their applications, which helps.
2. Bank loans
Excellent applications by women tend to result in a slightly higher chance of being offered a bank loan too. But women are a bit more cautious about taking on debt and more likely to turn down the loan offer.
3. Investor gender
Women find it much more difficult to access formal equity investment, like venture capital and business angel backing. Best estimates tell us that only around 5% of investors are women and the percentage succeeding in gaining backing is about the same. Investors are often drawn to people who remind them of themselves!
4. Venture capital
Venture capital (VC) investment doesn’t appeal to everyone, and lots of women are put off by the pace of business growth and loss of overall control involved. But there’s been considerable research which shows that even women who match the criteria investors are looking for – such as high-growth potential business models, ambition and business experience – find it more difficult to access venture capital investment. As a result, a number of programmes have sprung up to support women to access the venture capital and business angel funds out there.
Crowdfunding is an area where women in business are really excelling. Crowdfunding brings together micro-investments and social media and seems to complement women’s online communication style. 41% of successful crowdfunding campaigns are led by women and on average their campaigns raise over 10% more than those run by men, according to statistics from indiegogo.
6. Community Development Finance Institutions
Community Development Finance Institutions (CDFIs) are not-for-profit finance providers that usually provide small loans alongside business support and financial advice. It’s a package that particularly appeals to a lot of female-led start-ups, who are also more likely to value business support and training. Education and training massively increase women’s confidence about starting a business and accessing finance.
So while business finance is tough for everyone at the moment, there are still quite a few options out there. Information is key, especially for women, who are also more likely to restrict themselves to a narrow range of finance options. My organisation, Prowess 2.0, is filling the knowledge gap with a free eBook, the Women’s Business Finance Guide.
Finance is often, but not always, different for women in business. Understanding the distinctions and acting on them where necessary, could make all the difference for business survival and long-term growth.
Erika Watson enables enterprise as a consultant, trainer and writer, specialising in women’s business and social enterprise. Erika is editor of the leading online centre for women in business Prowess 2.0 and author of the aforementioned Women’s Business Finance Guide.