Not only are just 25% of women likely to seek financing for their businesses (compared to 34% of male entrepreneurs), but the loans they’re getting approved for are one-third less than what men are getting.
The imbalance in lending exists in venture capital, too
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photo: Getty
We’ve seen an unfortunately overwhelming amount of evidence that female employees earn less than their male counterparts. But what about the gap when it comes to getting small business financing?
Not only are just 25% of women likely to seek financing for their businesses (compared to 34% of male entrepreneurs), but the loans they’re getting approved for are one-third less than what men are getting.
This is shocking, inexplicable and unacceptable.
The imbalance exists in venture capital, too
But this issue isn’t just happening in old school banks: The venture capital industry is just as guilty. In 2018, investors poured $130 billion into U.S. startups. Just 2.2% of that went to female founders.
A study published in Harvard Business Review showed that women seeking funding are asked different questions than men. For instance, investors ask men how they will make money for the startup, but they ask women how they will keep from losing the investor’s money. Why the discrepancy?
Why are women getting less financing?
This problem isn’t going unnoticed. The minority staff of the Senate Committee on Small Business & Entrepreneurship developed a special report a few years ago titled “Tackling the Gender Gap: What Women Entrepreneurs Need to Thrive.”
They found several issues that made running a business a struggle for female entrepreneurs, including:
- Lack of role models and mentors.
- Gender pay gap.
- Unequal access to lending, funding and venture capital.
- These issues, combined with gender bias (either conscious or subconscious) and the fact that women tend to get fewer raises and may have lower credit scores, mean that running and growing a business may be more of a challenge for women.