Positioning your bank to serve the growing market of women-led small businesses.
By Alaina Webster
According to the 2016 State of Women-Owned Businesses Report by American Express OPEN, women-owned businesses are growing at five times the national average for all small businesses. During the recession years, employment at women-owned businesses increased by 20 percent while employment across small businesses of all types nationally declined 4 percent. Women own 29 percent of all U.S. small businesses, up 68 percent from 2007. In fact, the 2013 State of Women-Owned Businesses Report found that female-owned businesses included 10.6 million U.S. companies, generated more than $1.3 trillion and employed some 7.8 million people, numbers that have only increased in the last four years.
And yet — a 2014 report by the Senate Small Business and Entrepreneurship Committee found that for every $1 women received in conventional small business loans, men received $23. Why? Data from the 2016 Small Business Credit Survey: Report on Women-Owned Firms, released by the Federal Reserve Banks of New York and Kansas City, show that women- and men-owned businesses use credit cards at the same rates, but women are much less likely to apply for and/or receive loans (28 percent for women vs. 34 percent for men). Seventy-eight percent of women prefer to use personal savings, and only 41 percent choose to take on additional debt. Furthermore, when women are applying for loans, their approval rate is only 47 percent, while that of men is 61 percent.
For community financial institutions, ignoring or underserving women entrepreneurs is leaving money on the table. The New York and Kansas City Feds report shows that women are more likely to be approved for small business loans at small rather than large banks (67 vs. 50 percent); moreover, they’re more comfortable at small banks, reporting an 80 percent satisfaction rate. However, female business owners are statistically more likely to apply for a loan at a large bank, perhaps a result of misperceptions on both sides.
To appeal to women business-owners, banks need to market themselves to women. This starts by convincing women to apply in the first place. According to Access to Credit: A Guide for Lenders and Women Owners of Small Businesses, produced by the Federal Reserve Bank of Chicago, women respond favorably to marketing campaigns that include women. Want to attract female business loan applicants? Highlight them in your advertising and marketing efforts. Feature successful loan recipients in social media campaigns. Do everything you can to make it clear that your institution has a history of working with women.
When hosting networking events, ensure that the type and time of the event will appeal to a large range of business owners, both male and female. Events should not only be social in nature but provide real opportunities for women to meet and speak with other business owners in a professional capacity.
Finally, let women speak to women. Employing female loan officers says volumes about your valuation of women. Additionally, many women-led businesses specifically cater to other women; a female loan officer may have more insight into the possibility for success of a particular business proposal than her male counterparts.
The number of female-led businesses is only going to continue to grow — positioning your bank to appeal to this thriving market may set you apart from your competition.