The Future For Women Entrepreneurs Is Bright—But Financial Challenges Remain

By Rieva Lesonsky

“Women’s History Month is an important time to celebrate how far women entrepreneurs have come. We know they are starting businesses at historic rates. But we also need to think about how to continue to break down barriers in outcome-driven ways.”

Those words from Pam Seagle, the head of Women’s Programs at Bank of America, perfectly sum up the challenges America’s women business owners face every day. Yes, women-owned businesses positively impact the American economy. They own over 13 million businesses, employed 10.8 million workers in 2019 (closer to 12 million today), and boast $1.9 trillion in annual revenues.

But at the same time, it’s hard to celebrate. As Seagle notes, so many barriers stand in the way of achieving true success and economic parity. For instance, of total small business loan dollars, only 4% go to women.

The venture capital picture is even worse—companies with female-only founders received “just 2.1% of the total capital invested in venture-backed startups,” according to PitchBook. Hello Alice says this is truly “baffling when you consider that women-led tech startups continuously demonstrate significantly lower fail rates and generate higher returns for investors.”

And adds Sharon Miller, the president of Small Business/head of Specialty Banking and Lending at Bank of America, “While the Women’s Business Ownership Act of 1988 removed certain barriers, including ones that prevented women from accessing capital equally, there are still residual effects that make business ownership challenging for women. For example, approximately just 12% of decision-makers at VC firms are women, which contributes to a lack of understanding and connection with lenders.”

Amy Millman, the managing partner of StageNext, a relatively new venture fund that invests in women-owned businesses, agrees with Miller saying, “Women don’t speak banker.”

Ironically, I first met Millman around the time the Women’s Business Ownership Act of 1988 was enacted. At that time, according to “21st Century Barriers to Women’s Entrepreneurship: Majority Report of the U.S. Senate Committee on Small Business and Entrepreneurship,” there were 4.1 million women-owned businesses in America. The Senate Committee report attributes the subsequent success of women entrepreneurs to this “landmark legislation,” which, among other things, authorized the Small Business Administration (SBA) to establish a certified loan program for lenders, created the National Women’s Business Council, and directed the Census Bureau to collect information on women-owned businesses.

And yet, here we are 35 years later, with 29% of women business owners polled in Bank of America’s Small Business Owner’s Report (SBOR) saying they don’t believe they will ever have equal access to capital.

Women entrepreneurs’ funding challenges are underscored in a report by Hello Alice, “Standing in the Gaps: A Roadmap to Redesign the Capital Continuum for Women Tech Founders,” which surveyed almost 20,000 women tech founders. According to the report:

• 53% of women business owners say they have unmet financing needs, with loans and credit cards cited as the most common forms of financing sought
• Nearly 90% don’t have access to a business credit card
• 61% use a personal credit card to fund their businesses

Some of the primary reasons cited for the funding gap:

• Conscious and unconscious bias
• Unequal access to networks and education
• A disproportionate responsibility for caretaking and household work

Women lack access to capital

So, in addition to not speaking the same financial language as funders, the fundamental question is, why are women business owners still dealing with financial challenges? Geri Stengel, the president of Ventureneer, says that while many factors affect gender disparities in access to capital, one, in particular, is that women’s “networks tend to be smaller and [they] have fewer connections to financing sources. And, whether it is conscious or unconscious, they often face bias.”

Bank of America’s Seagle says lacking “access to capital can deter women entrepreneurs from following their dreams.” And she thinks women should explore all available financial resources, including grants and the recently expanded Access to Capital Directory from Seneca Women and Bank of America.

Elizabeth Gore, cofounder and president of Hello Alice, says, “Women entrepreneurs who have faced challenges accessing capital need to know they are not alone in this struggle. According to our [report], only 19% of those surveyed funded their businesses through small business loans. However, there are various reasons why accessing loans can be difficult, such as insufficient lending history, low credit scores, or inadequate cash flow.”

But there are alternatives to traditional business loans. Stengel points to “an array of financing options that have entered the market, including rewards-based crowdfunding, regulation crowdfunding, and online lenders. And women are funding women as angel investors, limited partners in venture capital funds, and VCs. It is critical that women entrepreneurs learn which financing options are right for their situation. If they did, they would raise money faster and at a lower cost.”

Moving forward faster is key. Millman urges women to be less patient. She says, “Women race forward till they get to the wall someone erected. And then most of them wait at the wall. But some people figure out how to get over or around the wall. The system was designed by someone [men] in their own image. If you didn’t fit that mold, you didn’t get through. So you have to be willing to disrupt it.”

Women entrepreneurs face extra challenges

Many women business owners are also challenged by their responsibilities at home and need to figure out how to simultaneously build a business and a family. If that’s you, as a working mom herself, Miller says to remember, “Not every day will be perfect or easy, but that’s when you [need to] rely on your support system. Remember you are never alone, and it is okay to struggle. Lean on people you trust—family, friends, colleagues, mentors—to lift you up when you’re facing a challenge or need support or advice.”

Gore, also a working mom, says she knows how difficult it can be to balance responsibilities at home with the dedication it takes to build a business. “But,” she says, “isn’t that what makes us the best owners? Our incredible ability to manage time! Throughout my career, I’ve found value in educational resources, mentors, and the support systems of women who can relate to these hurdles.”

Miller says it’s normal for entrepreneurs to feel discouraged at times, but encourages them to “‘own their chair,’ embrace their success, and lean into the confidence that led them to start on their entrepreneurial journey. There are common themes in raising a family and running a business, and it’s about striving toward your goals, routing yourself in passion, and pushing to see yourself and the people around you succeed. Although difficult, don’t forget why you’re taking on this challenge.”

Feeling discouraged doesn’t mean giving up. Channeling her inner Yoda, Millman adds, “You either do, or you don’t. There is no try.”

It’s time to make some noise

Part of that challenge is to work together to fundamentally change attitudes about lending to women. Is that possible? Stengel says it is, but we must “hold funders accountable by outing the lack of diversity in whom they fund.”

Gore agrees, saying that “reducing bias” is key to “improving lending opportunities for women.” And she adds, “To achieve more objective decision-making, [lending] institutions should commit to collecting data and analyzing trends that can reveal personal biases and overlooked opportunities.”

Part of changing attitudes is making some noise. Gore says it’s “critical to celebrate the stories and accomplishments of female founders and highlight their unique challenges. We should be shouting [about the underfunding of women] from the rooftops to bring attention to the problem. Raising awareness and pushing institutions to change can help eliminate these barriers.”

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The future for women business owners

Both Miller and Gore are excited about what lies ahead for women entrepreneurs. Gore sees strength in numbers: “I see incredible opportunities for female founders, especially if founders, institutions, and investors work together.” Miller cites the recent surge of women-owned startups: “Over the past three years, the number of women entrepreneurs is growing significantly faster than men entrepreneurs, and women business owners are well positioned for growth despite the current economic environment. I believe the momentum will continue.”

To reimagine the lending environment for women business owners, we need actual tangible goals and solutions. According to Hello Alice, we need to:

• Address early and short-term funding gaps through equitable, frictionless grants
• Increase access to business financing and banking to help founders manage volatility
• Reduce bias and increase transparency in venture funding to support scale

Millman says you need to know where you are and where you’re going but be open to exploring your options along the way. “You should always have a Plan B, and a Plan C and D as well.”

Seagle believes part of the solution is access. She says women need “access to capital, access to training opportunities, and access to the market to propel their ventures to success.” To fill that demand Bank of America partnered with Seneca Women to launch a new online Marketplace for women entrepreneurs, offering access to new markets and giving consumers opportunities to shop and support these women-owned businesses.”

Women have the power

Despite the challenges, says Bridget Weston, president of SCORE, “women-owned businesses are growing at unprecedented rates [because] they’re creative, resilient, and expert multitaskers.”

The problem, Millman says, is that women business owners seeking funding are “still doing the same thing, thinking lenders know more than they do. Women keep chomping at the bit to impress them. Don’t! Instead, focus on what you’re doing. Ask yourself, ‘What did I do right that informs what I do next?’”

As Glinda the Good Witch told Dorothy, “You’ve had the power all along.” Millman agrees, saying the solution lies within us. “Change the way you think,” she urges. “If what you want doesn’t exist, how can you create it?”

As we move forward, Miller sees endless opportunities. She says, “There are numerous possibilities for women business owners. As we lift each other up, we see that we are capable of not only reaching our goals but also exceeding them.”

Resources for women entrepreneurs

There’s an array of resources available for women business owners, particularly from the companies of the women interviewed in this article:

Bank of America:

Hello Alice:

SCORE:

Ventureneer:

Also, check out the First Women’s Bank and its Resource Center.

About the Author

Rieva Lesonsky is CEO of GrowBiz Media and SmallBusinessCurrents.com and has been covering small businesses and entrepreneurship for over 30 years. Get more insights about business trends by signing up for her free Currents newsletter.