Women-owned businesses continue to drive business growth in this current economy. As a dedicated section of the population committed to growing their businesses, they often tackle the issue of whether they face the same challenges as men when applying for business loans. Do lenders approve funding for women entrepreneurs at the same rate as men?
The short answer to this is, probably, yes. In essence, a woman would face the same credit standards as a male borrower when applying for credit as it should be. For approval, there will be the need for collateral, an established credit history, assets, and likely a sizeable down payment. However, we should dig deeper to fully understand the world a woman-owned business may face when pursuing financing.
Institution
The first thing to look at is the type of lender our female business owner is pursuing financing from. Banking institutions operate in a traditionally served male-dominated industry. That is now beginning to change.
Do women feel completely comfortable working with lenders in this climate? It is possible that some may not feel confident that their application would be treated fairly and thus will not try. It would be easy to understand why some may feel more comfortable pursuing their financing in a non-traditional setting from an online lender.
In a non-traditional setting, women are more likely to be approved on the strength of their financial situation.
Industry
Another factor to consider is the type of industry the women-owned business is in. It seems that lenders tend to like to work in areas that they are familiar with. For example, manufacturing, auto financing, or commercial real estate. How is an application viewed when a woman requests funding for her specialty boutique?
A commercial lender is not meeting the business owner’s needs if they cannot deal with its customer’s varied requirements. This lack of service could hinder an institution from evaluating the application if they do not have experience in this arena. Yes, it should come down to the numbers. But if the lender cannot assess and project performance for this type of business, they may pass on it for something more in their field of expertise.
Unfortunately, this is a common mistake.
Borrowers should be judged on past performance and growth projections. A lender’s inability to comprehend this world should not be a factor. It is in the lender’s purview to maintain effective relationships with their customers.
The underwriting process should be held to the same standards for men and women. We can make the case that this is not going to happen in all circumstances. The end goal for the lender is to take into consideration the liabilities in making the loan.
Fortunately, lending institutions are about maintaining a profit. It would help if you showed that you understand your business’s facets and communicate that information well. The tip here is to know your numbers to produce a complete workup of your financial statements.
If you know your numbers, have the assets, growth, current ratios, and ability to repay, you have a good shot at landing the financing your business needs.