One of the biggest challenges entrepreneurs face is getting the business finance loans they need to grow their small business. The gender disparity in financing begins even before a business can get off the ground, with women reporting more of a challenge with obtaining funding than men. As the National Women’s Business Council points out, men start their businesses with nearly twice as much capital at an average of $135,000 compared to just $75,000 for women. That gap persists throughout the funding process.
After exhausting the most common solutions, like using personal savings or seeking investment money from family and friends, banks have traditionally been the next step for small business financing. But that process can be daunting and time-consuming, especially for small businesses who may not have the extensive revenue history or high-value assets that serve as collateral often required by banks. Increasingly, small business owners have turned to online and peer-to-peer lenders for quick cash to support operations when a bank loan isn't an option.
Even then the funding is never guaranteed, with 60% of small business applicants receiving significantly less than the amount they applied for, according to a small business owner survey by the Federal Reserve. And the outlook is even bleaker for a female entrepreneur. While women-owned businesses have grown in number by nearly 50% over the past decade, financing has not kept pace, with three-quarters of all women-owned businesses failing to receive the funds they need.
The challenge is even greater if you’re the female founder of a startup seeking venture capital funds. In 2016, women received a paltry $1.46 billion in VC funding compared to the $58.2 billion companies with male founders received. Yet, women-owned businesses now comprise 36% of the country’s businesses and make significant contributions to the U.S. economy, generating over $1.4 trillion in sales and employing over eight million people each year.
This financing gap creates a tenuous situation where female entrepreneurs are disproportionately forced to either take on more debt, saddled with high interest rates and unrealistic repayment schedules, or simply give up on their dreams entirely. Most small business owners assume that traditional bank loans and fast cash from online lenders are the only options available for obtaining working capital. However, commercial financing options like factoring have been the answer for countless entrepreneurs seeking to grow their business because of the flexibility and added support these funding solutions provide when businesses need it the most. This approach is especially advantageous for female entrepreneurs who may need additional funding beyond what they received from the bank loan, or who may have less money for start up funds and fewer personal savings to begin and grow their businesses.
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