Small Business Finance News

Businesses Owned By Women And Minorities Face Serious Funding Obstacles

Written by Tim Morral
Published: 5/7/2013

SBA reports that women and minorities have less access to financial capital than male and non-minority entrepreneurs.

It takes money to make money--and female and minority entrepreneurs are finding that their access to financial capital is more restricted than it is for their male and non-minority counterparts.

Minority Women Business Funding

According to a recent study by the Small Business Administration (SBA) Office of Advocacy, inadequate capital is severely limiting the growth of women-owned and minority-owned firms.

Since women-owned businesses tend to be smaller and younger than other firms, financial institutions are less likely to make favorable lending decisions, limiting these entrepreneurs ability to launch and expand their companies. From an equity standpoint, women have fewer opportunities for interactions with venture capitalists and are underrepresented in fast growth and high-tech--the sectors that are most appealing to outside investors.

Minorities tend to experience similar restrictions and funding challenges. However, their inability to secure adequate funding is further complicated by the fact that they start their entrepreneurial careers with lower wealth levels.

Capital isn't the only challenge associated with minority-owned business and the female entrepreneurs versus male entrepreneurs dilemma. Statistically, female business owners tend to take fewer risks than male entrepreneurs and both categories of entrepreneurs (women and minorities) can suffer from deficits in experience and business expectations.

Although the research showed that during the financial crisis fewer women and minorities applied for loans based on fear of denial, those who did apply were more likely to have their loan applications rejected than male and non-minority applicants.

Going forward, the SBA recommends incentives to encourage women and minorities to enroll in STEM (Science, Technology, Engineering and Math) disciplines as well as developing networks that increase access to financial capital for women and minority entrepreneurs.

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