State of Women-Owned Businesses


Access to capital is consistently ranked among women business owners’ greatest challenges in growing and elevating their businesses. The Washington, D.C.-based U.S. Women’s Chamber of Commerce asserts that not only the amount of capital but also the composition and cost of capital is holding women’s businesses back from realizing their full economic potential. Given this history of hardship raising money the conventional way — via banks, venture capital firms and private equity — women entrepreneurs are turning to alternative sources of funding to launch or expand their businesses. Among them are Black women entrepreneurs, the country’s fastest-growing group of business owners with a 322 percent increase in their numbers since 1997, according to U.S. Census data analyzed last year by American Express Open. Beyond size and gender, however, businesses owned by Black women face challenges related to the ethnicity of their ownership when financing is being sought. 


Consider the following statistics:  

• Male entrepreneurs are 40 percent more likely to receive venture capital funding. Female founders receive just 5 percent of VC funding, and a mere 2 percent of total funding from outside equity compared to 18 percent for men.

• A study conducted by researchers from Harvard Business School, the Wharton School of the University of Pennsylvania and MIT Sloan School of Management found that investors are more likely to say “yes” to business ventures pitched by men, even more so pitched by “attractive” men, than by women;

• A National Women’s Business Council report shows that while women-owned firms exceed growth expectations, they still lack access to capital. For every nine men raising equity to start their own business, only one woman will succeed in doing so, the report says.

• A 2010 study by CB Insights examining disparity in VC funding for Silicon Valley companies found 87 percent of all VC-backed founders were white, 12 percent were Asian, and less than 1 percent were Black. 

• Black-owned businesses with gross receipts above $500,000 are three times as likely to be denied loans as white-owned firms of similar size.

• Of the 44,376 loans guaranteed by the U.S. Small Business Administration 7(a) lending program in 2012, only 1,080 were Black-owned.


Credit unions  

Bankrate Inc., the Web’s leading aggregator of financial rate information, reports that consumers are turning to credit unions as rising fees and scandals fuel misgivings about banks. Unlike banks, which are for-profit institutions with the primary goal of making money for their stockholders, credit unions put their members first, passing on profits in the form of benefits such as low fees and low rates. Citing statistics from the Credit Union National Association, or CUNA, Bankrate says credit unions gained 1.3 million new members last year to reach a record high of total members. 


Last November, the women’s chamber rolled out its own credit union specifying its threefold mission: provide access to capital, ensure fair lending practices, and deliver low-cost business and savings solutions to its members across the United States. “The U.S. Women’s Chamber of Commerce Seed Federal Credit Union is a game changer for women and small businesses. After decades of challenges in securing fair access to capital and being targeted by predatory lending practices, women are now in the driver’s seat to control and operate our own national financial institution. Through our national federal credit union, women lead on the inside of the financial and lending system rather than standing on the outside looking in,” Margot Dorfman, the chamber’s CEO, said at the time.


The credit union empowers the chamber to leverage the economic strength of women, government and private sector grant opportunities to provide affordable loans for businesses, Dorfman said, as well as teach women to be more astute with the capitalization of their businesses and develop its own savings and loan products specifically tailored to the needs of women and business owners.



Crowdfunding, whereby several people contribute small amounts through sites like Kickstarter, Indiegogo and CircleUp to fund a business or project, is allowing female entrepreneurs to more easily get the capital they need. Appearing in the lexicon of lending just in 2006, crowdfunding had grown to a $5.1 billion-plus industry by 2013 and is expected to surpass venture capital this year with more than $34 billion raised online.


“This alternative funding pathway is helping women overcome conventional obstacles to obtaining capital and transform their business ideas into reality. Not only are women finding more funding on crowdfunding platforms than traditional VC routes, they are having even greater success than men,” Research Media Ltd., said in its report “The Value of Investing in Women: How Crowdfunding Is Closing the Gender Gap.” 


One study that analyzed funding through Kickstarter found that female-led business ideas were more likely to reach their funding goals than their male-led counterparts, the Research Media report said. “Across the board, female businesses triumphed, with 37 percent of all women-led ventures being funded, compared to 32 percent of those led by men. This trend was even more noticeable in the technology sector where an impressive 65 percent of female-led tech startups reached their funding goals compared to just 30 percent of those founded by men.”


CircleUp, an equity-based crowdfunding site, reports that 70 percent of women-led startups have raised funds on their site, compared to 58 percent of those founded by men; while Indiegogo states that their women-led campaigns raise on average 11 percent more money than those led by men.


The U.S. Security and Exchange Commission’s recent rulings on equity crowdfunding give women-owned businesses, particularly those owned by minorities, even greater access to capital. The rulings, which the SEC approved last October under Title III of the Jumpstart Our Business Startups Act, or JOBS Act, allow investors with less than $1 million in assets to invest in private offerings for the first time in 80 years. Essentially, they allow small firms and startups to solicit funding from anyone, regardless of their location, net worth or wealth, offering ownership stakes, or shares of stock, to their most supportive customers and clients.


Online financing

Credit unions and crowdfunding are hardly the only games in alternative financing, especially when funds are needed in a hurry. Online financing facilities that focus on the health of a business instead of personal credit are upending small business lending, attracting women entrepreneurs in the process. Examples are PayPal, Kabbage and OnDeck.


Tasha Burton, African-American owner/operator of Belle Butters LLC, turned to PayPal’s working capital loan program to purchase supplies in bulk to prepare for the increase of holiday sale orders and additional supplies for a holiday sales event out of town. Rolled out in 2013, the program is available only to qualified businesses that already process payments through PayPal. Loans are extended based on the business’ PayPal cash flow history.


“Because of the PPWC loan I received in October, I was able to work ahead of the Black Friday/Cyber Monday sales and readily ship out one hundred orders just two days afterward. Because my business is handmade, the turnaround time is usually much longer during that time of year, but PPWC made it much easier to handle the increase of sales,” Burton told TNJ in an interview. “PPWC has made it incredibly easy to obtain a loan because they already know what my sales flow is like and because my loan is based off of the sales income and not by my credit score. It is much easier as a small-business owner to be able obtain a loan this way. Additionally, the process is very quick and easy to understand.


Founded by Burton in 2009, St. Louis, Missouri-based Belle Butters makes natural products for hair and body, catering primarily to women of color. “I was one of the first few businesses contacted by PayPal about PPWC when it was initially launched in October 2013. The day I received the email, I carefully read over the details of how it worked. After filling out the necessary information, I was provided the option of the amount I would like to borrow. I believe that being able to choose the option of how much interest I’d like to pay back on the loan made me even more comfortable with my decision to use PPWC. You do not get this option with other nonbank loan companies,” Burton says.


Atiba de Souza, owner of Cupcake Dropoff, a custom dessert business in North Bethesda, Maryland, tells TNJ that he applied for but never received bank funding. He and his daughter launched the business eight years ago with their personal savings. The business is steady most of the year, he says, but Mother’s Day, Valentine’s Day and Christmas are flooded with orders. Like many other small businesses, his cash flow was down but he needed inventory to meet demand. Utilizing $4,000 in PayPal Working Capital funds, he was able to turn Mother’s Day into a $20,000 profit. 


“Cash flow is the biggest barrier to growth,” says de Souza. “PayPal Working Capital enabled me to bet on myself. I know I can make online sales work. I’ve been denied loans from banks before. PayPal said ‘we see your track record and we know you can pay it back.’ It took the trepidation of the loan away. The bank just wants to see my credit score and my tax documents, but won’t see that we’re actually doing good business.”


Zakiyyah Yasin, founder/owner of Sassy Princess LLC, a spa in Woodbridge, Virgina, that caters to girls aged 3 to 13, capitalized the business with personal credit cards before turning to crowdfunding, Kabbage, OnDeck and PayPal Working Capital. “I have never used bank funding and honestly, at this stage in my business, I highly doubt I will need to go that route,” she says.