Many women in the workforce (and many men, as well) have realized that traditional employment just isn’t working for them. Lean in, lean out, right or left, embrace STEM, try to beat the boys at their own game or don’t sleep. There are still only 168 hours in a week, life needs balance and the rewards of corporate life are uncertain. For an increasing number of talented and creative women the solution is entrepreneurship.
Since 1997, the number of businesses owned by women has increased by 59 percent, and women now account for 30 percent of small businesses. Nonetheless, many of these fledgling enterprises struggle. Why is this? It’s largely about access to capital. Recent research by the National Women’s Business Council suggests three ways to tackle this problem.
Found Your Business with Other People
Although many businesses start as sole proprietorships, it may not be a good idea to keep going that way past a certain point. Apart from the hair-raising potential for personal liability, it is more difficult to establish business credit separate from personal credit. It is also more difficult to scale a business as a sole proprietor, especially working from home. Investors are interested in scalability.
Don’t shortchange your planning by simply filing for an LLC online or creating an informal partnership. The way you organize your business should support your plans for its future, and since you’re not going it alone anymore, some work with an accountant and a business attorney may be well worth the investment.
Weigh the Benefits of Equity Financing
The statistics on venture capital funding for businesses owned by women are dismal. In 2013 only 7 percent of venture capital funding went to women-owned businesses. Women received only 2 percent of total funding from outside equity compared to 18 percent for men.
Some investors, however, like the Women’s Venture Capital Fund and Version One Ventures either specifically seek women-owned businesses or are more open to them. The other part of the equation, of course, has to do with the right metrics and a polished pitch. This is where mentoring and possible experience with a business incubator can be important. Project Eve, interestingly, offers these opportunities in an online format.
Some suggest that crowdfunding may be an alternative to venture capital, but its full potential may depend on SEC guidance expected later this year.
If Your Loan Application is Denied, Try Again
Although women need far more equity financing, they also need more debt to adequately capitalize operations. During the Great Recession, women-owned firms were much more likely to have their loan applications denied than their male counterparts. They were also disproportionately discouraged and dissuaded from trying again. Clearly just doing the same thing and hoping for a different result is not much of a strategy, but mentoring and an outside review of business plans may help women build a stronger case.
Women are three to five times more likely to receive Small Benefit Administration loans than conventional loans. Even so, women-owned businesses receive only 13 percent of the dollar value of SBA loans and 4.3 percent of federal contracts. Many people know that the SBA has a goal of awarding 5 percent of federal contracts to women-owned small businesses. Few, however, are aware that goal has never been met, either nationally or statewide.
Women entrepreneurs may take advantage of resources such as a local SBA office or the Office of Women’s Business Ownership to better position themselves to compete for these resources.
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What do women entrepreneurs want? What everybody else wants — a chance to balance life and work, the chance to succeed and the rewards for success. Getting from here to there takes access to capital, though. Although the challenges are not necessarily different, the climb seems steeper for women-owned businesses. The problem has historical roots that go far back, but women have better options now to seek the resources to grow their businesses to full potential.