In honor of National Women’s Small Business Month, The Credit Junction is placing a special emphasis on highlighting the important strides that women business owners have made over the last 20 years or so in the United States.
The number of women-owned small businesses has skyrocketed in recent decades. In fact, there are now nearly 10 million women-owned businesses in the United States today, which is a 74% increase from 1997 and a 27.5% increase from 2007. These women are changing the face of America's Main Street and are bringing monumental contributions to society through their innovative and successful small businesses. As an online lender, The Credit Junction is particularly interested in the intersection between women in business and their access to finance. Particularly, we are interested in being one of many resources women business owners have to grow their businesses.
Just 25 years ago, women were unable to apply for business loans without the co-signing of a male relative. Now, thanks in part to the Women’s Business Ownership Act, women have been seizing on opportunities in all sectors to become the United States’ fastest growing sector.
Achieving such growth, however, has not been easy for these women. Although they have made impressive strides in becoming integral parts of the small business sector in America, there remains a wide gap regarding the opportunities available to both men and women in growing their businesses. This gender gap is especially prominent with regards to financing.
On average, women start their businesses with half as much capital as their male counterparts. There exist few reasons to explain this disparity, which serves as a reminder that gender, when all other factors are kept constant, remains an important determinant of economic opportunities, most notably in underserved or impoverished areas. A recent study at Babson College revealed that only 2.7% of all financing provided by venture capital firms between 2011 and 2013 went to companies led by women. With venture capital finance representing one of the main sources of funding for many young and small companies, and women-led businesses representing a third of all businesses in the United States, this is a troubling finding for many women in business.
Yet, despite this diminished access to capital, women-owned and women-led firms have reported higher levels of financial performance compared to exclusively men-owned firms. It is this finding, and the belief in providing working capital to businesses based solely on merit, that drive The Credit Junction in a lot of the work that we do today.
Our technology has allowed us to better understand businesses holistically and provide them with access to capital in a way that is far more transparent, impactful and fair than in the past. The process of walking into a bank and facing the uneasy feeling of rejection and uncertainty regarding the status of a loan application submitted several months prior is now antiquated.
Technology is agnostic, and allows us to provide business loans to clients that have otherwise been traditionally excluded from financing. In our evaluation of a loan application, we are instituting an innovative approach that focuses on understanding data and using new methods to analyze that data.
We are in the beginning stages of what we see as a revolution in the field of small business finance. Including women in this movement should be nothing less than obvious. As the Brookings Institution stated in their report named Minority and Women Entrepreneurs: Building Capital, Networks and Skills, “increasing the rate of minority and female entrepreneurship may help to reduce the race and gender wealth gaps, to reduce income and wealth inequality, and to increase social mobility.” We hope that our fair lending process will help us do that. Here is to hoping that others join us.