Empowering Women in Small Business Financing

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A Historical Perspective on Women’s Access to Business Capital

Not too long ago, women who aspired to secure business capital faced a daunting reality: they were often required to have a male relative co-sign their loan applications. It was a challenging era for women entrepreneurs. However, significant strides have been made since 1988 when this restrictive law was revised. Despite the progress, gender disparities in accessing financial resources continue to persist, spanning the realms of investor equity and traditional bank loans.

Gender Disparities in Venture Capital and Global Challenges

The gender gap in venture capital funding in the United States remains a critical issue. In the past year, women-founded companies received a meager share, accounting for less than 3% of the total capital invested in venture-backed startups. The situation is even more severe on a global scale. According to data from Goldman Sachs, women-owned small and medium-sized enterprises worldwide face a daunting gender credit gap, estimated at a staggering $1.5 trillion. These numbers underscore the significant challenges that women entrepreneurs continue to encounter.

A Milestone for Women-Owned Small Businesses

In fiscal year 2023, the Small Business Administration (SBA) reached a remarkable milestone in its support for women-owned small businesses. The SBA approved loans that surpassed the $5 billion mark, representing approximately 21.3% of all loans extended to small businesses. These statistics are a testament to the growing influence of women entrepreneurs in the business ecosystem. The latest data from the Census Bureau’s Annual Business Survey also reveals a positive trend, with 21.4% of employer-owned businesses being led by women.

The Biden Administration’s “Bidenomics” Initiative

While the $5 billion loan volume in fiscal year 2023 did not exceed the peak of $5.7 billion in 2021, the Biden administration is actively promoting this achievement as part of its “Bidenomics” initiative, particularly in anticipation of the next year’s election. The 21% share of loan volume is a significant milestone and reinforces the commitment to economic equity.

A Commitment to Economic Equity

SBA Administrator Isabel Guzman has expressed unwavering support for women-owned small businesses, emphasizing their pivotal role in driving America’s historic small business boom. The Biden-Harris Administration remains dedicated to ensuring that women receive the necessary capital and resources to build resilient businesses, thereby contributing to job creation and fueling the economy. In Guzman’s words, “Bidenomics is about growing our economy equitably.”

Remarkable Growth in SBA Loans to Women-Owned Small Businesses

The SBA’s efforts have resulted in remarkable growth in loans to women-owned small businesses. In fiscal year 2023, over 13,059 SBA 7(a) and 504 loans were granted to these businesses, marking a substantial increase from the 7,715 loans in 2020. The total loan volume exceeded $5.18 billion, demonstrating a remarkable 61% growth compared to 2020.

Impact of Women Entrepreneurs on the Economy

Quantifying the real-time impact of women entrepreneurs on the economy can be challenging. Nevertheless, their businesses make significant contributions. Women-owned businesses generate an estimated $1.9 trillion in receipts, provide employment for 10.9 million people, and have an annual payroll of $432.1 billion, according to the Census. This data, available through calendar year 2020, underscores the pivotal role women entrepreneurs play in shaping the business landscape.

Challenges in the Current Credit Environment

The SBA’s accomplishments come in the midst of one of the most challenging credit environments in recent history. The Federal Reserve has raised interest rates by more than 5% in a year, resulting in small business loan rates reaching double-digit percentages. A survey by Goldman Sachs’s 10,000 Small Businesses Voices indicated that 78% of small business owners are concerned about access to capital. More than half (53%) of them cannot afford a loan at the current interest rates.

The SBA’s Lending Programs

The SBA’s pivotal lending programs play a crucial role in supporting small businesses. The 7(a) loan program provides guarantees to lenders offering financing to small businesses, with loans available for amounts up to $5 million. Meanwhile, the SBA’s 504 loans provide long-term, fixed-rate financing of up to $5.5 million, primarily directed at major fixed asset purchases.