The landscape for women-owned businesses in the US has matured over the years, especially when it comes to securing small business loans for women. Finding the right business loan is not easy but women entrepreneurs face even greater adversity in funding than other entrepreneurs. Gender inequality, racial disparity, access to financial support, confidence, and market saturation remain some of the most significant barriers to women business owners.
But there is some good news. Recent studies have revealed that despite the challenges female business owners face, there has been a significant growth in women-owned businesses. According to the Annual Women-Owned Business Study 2024 by Biz2Credit, the average annual revenue for women-owned businesses increased by 15.5%, from $391,582 in 2022 to $452,446 in 2023. Still, it showed a 34% gap as compared to men-owned. The report also mentions that the average funding size for women-owned businesses was $52,779, vs. $74,544 for men-owned businesses in 2023.
For any woman entrepreneur today to navigate the financial scene effectively, it is important to understand how their businesses fare against men-owned ventures in terms of loan approval rates. So, without further ado, let’s check out exactly where the problems lie in loan approval rates and funding.
Financial Disparities
One of the biggest challenges for women entrepreneurs is securing financing. According to a 2024 report by Forbes Advisor, male-owned businesses receive a whopping 71.6% of SBA 7(a) loan approvals, totaling almost $18.4 million. In contrast, women-owned businesses receive just 14.8% of these funds, amounting to just over $3.8 million. This stark disparity highlights the ongoing gender gap in business financing, especially while trying to access small business loans for women.
Loan Repayment Performance
Despite facing hurdles in securing loans, women entrepreneurs excel in loan repayment. A report by Economic Times shows that only 3.4% of women entrepreneurs defaulted on loan repayment compared to 4.6% of male entrepreneurs. This superior repayment performance underscores the reliability and financial responsibility of women entrepreneurs, making them a safer bet for lenders.
Funding Acceptance Rates
The Biz2Credit 2024 Women-Owned Business Study reveals that the funding acceptance rate for women-owned businesses was 35%, reflecting an 18% year-over-year increase in their average funding size, which reached $52,779. This is higher compared to men-owned businesses, which had a funding acceptance rate of 29%. This indicates that women are more likely to secure funding when they apply, although the average funding size remains smaller compared to their male counterparts.
Disparities in Loan Amounts
Lendio’s 2024 Woman-Owned Business Statistics report shows that women-owned businesses received just 32.6% of the approvals and 28.4% of the dollars offered in SBA 7(a) and 504 loans in the 2023 fiscal year. Additionally, 45% of women-owned businesses were fully approved for the loan requested, compared to 55% of men-owned businesses. This disparity in loan amounts and approval rates underscores the ongoing challenges women face in obtaining adequate funding for their businesses, particularly when they are trying to get small business loans for women.
Economic Impact and Growth
Despite these challenges, women-owned businesses have shown remarkable growth and economic impact. According to the 2024 State of Women-Owned Businesses Report by American Express, women-owned firms now make up 30% of all businesses in the U.S., generating about $1.5 trillion in revenue. The report emphasizes the need for continued support and resources to help women entrepreneurs thrive, highlighting the significant contributions of women-owned businesses to the U.S. economy.
While women-owned businesses face significant challenges in securing small business loans compared to their male counterparts, they demonstrate superior loan repayment performance and have a higher funding acceptance rate. However, the disparities in loan amounts and approval rates highlight the need for more equitable financing opportunities. Continued support and targeted resources are essential to help women entrepreneurs overcome these barriers and fully realize their potential in the business world.
Also Read: Understanding The Factors Influencing Business Loan Interest Rates
