As of recent years, women-owned businesses in the United States have experienced significant growth and have become a substantial force in the economy. It is estimated that there are more than fourteen million women owned business generating over two trillion dollars in annual revenue. The growth in women owned businesses has been fueled by a myriad of reasons, is occurring across all age groups and serves a diverse number of industries.
Even with the growth in the number of women owned businesses and the economic impact these business have, women owned businesses are still underserved in the commercial credit markets. Female business owners tend to operate in industries that have a greater need for continuous working capital, thus women owned businesses tend to rely on revolving credit lines. Even with this demand for capital, women business owners are hesitant to apply for financing, and when they do, they are receiving a growing proportion of commercial credit, but the amount of credit granted still trails that of men. The recent growth in women owned businesses could be a driving factor in this disparity. New business have limited to no commercial credit history forcing lenders to evaluate the guarantor’s personal credit.
On average, female business owners have a lower consumer credit score, which could be because they are carrying more personal debt to fund their businesses, ultimately decreasing their access to commercial credit. There are a number of factors that when combined, are limiting equal access to commercial credit for female business owners. The good news is that the number of successful women owned businesses continues to climb, and more grants and loans are available to women business owners.
What I am watching
While inflation in the U.S. is easing, it is still above the Fed’s 2% target. It is widely expected that the Federal Reserve will begin to lower interest rates later this year. It appears that the anticipated recession which led lenders to tighten credit will not occur. Therefore, lenders will likely begin to loosen credit criteria and potentially provide more opportunities for women-owned businesses to obtain the credit they need to operate and expand.
