Women entrepreneurs and small business owners only receive about 4 percent of all money lent to small businesses each year, yet account for 30 percent of all businesses in the U.S. and generate more than $1.7 trillion in revenue.
This means that $1 out of every $23 in small business loans is given to a woman-owned business, according to a U.S. Senate Committee report.
Arizona ranks as the 10th-highest state for the growth of women-owned businesses in the last 20 years, and since 2007, the number of Hispanic women entrepreneurs tripled here.
“From a female perspective, I think where the challenge lies is that women tend to start smaller businesses, microbusinesses, and most women and women of color tend to start their business with their own personal capital or borrowing from family or friends or even a personal credit card,” said Lea Marquez Peterson, president and CEO of the Tucson Hispanic Chamber of Commerce.
“So the question really isn’t about borrowing money, it’s about how you scale your business,” she added.
The disparity of funding for women-owned businesses exists outside of conventional small business loans, too. Women receive just 7 percent of all venture capital investment money.
Latinas and African-American women are the fastest-growing segments of business owners nationwide, yet funding disparities between men and women entrepreneurs only worsen for minority women, reports show. A study by First Round Capital concluded that minority women only receive 0.2 percent of venture capital funding.
The reason women-owned businesses are receiving less funding is not a lack of success. Between 1997 and 2017, women-owned businesses had a growth rate more than 2.5 times the national average compared to all businesses.
“I think historically, since the recession, things have improved in terms of business funding, but it’s still very much a challenge especially for women and especially the closer to the border you get,” Peterson said.
Why?
High credit scores are major factors in how eligible someone is for a loan, and on average, women entrepreneurs tend to have lower credit scores than men entrepreneurs by about 15 points, according to a Fundera report.
A report from Credit Sesame, a website that analyzes credit data, suggests that this difference in credit scores may stem from the gender wage gap.
The Credit Sesame report found that the average man owes about $4,000 more money in debt than the average woman, but the average credit score for men was still higher than the average score for women. One explanation for this could be that men have lower “debt-to-income ratios,” meaning while their debt is higher, so is their income, allowing their credit scores remain higher.
Another possible explanation is that business companies’ decision-making roles are still mostly filled by men, and “lots of times, organizations are willing to loan money to people who look a lot more like them,” according to Michelle Pitot, chief of staff for the YWCA’s Women’s Center for Economic Opportunity.
Ildefonso Poncho Chavez, director for the University of Arizona’s Eller College economic development program, said qualifying for loans boils down to “the five Cs”: capital, credit, character, collateral and capacity. Chavez said he doesn’t think there is gender-based discrimination at play when applying for loans – the five Cs make or break the deal no matter who’s applying.
A Harvard University research study found that investors prefer entrepreneurial pitches when men present them instead of women, even if the content of the pitch is exactly the same.
The Small Business Administration, or SBA, is a government agency that works with lenders to provide loans to small businesses. SBA does not lend money directly to business owners, but it tries to reduce risk for lenders and give business owners more access to capital.
“It doesn’t matter to the SBA whether you’re a woman or not,” said Stephen Hart, a public information officer for SBA. “It’s based upon your business plan, your credit history, your experience – all of those are questions that you will discuss and negotiate with the bank. The bank is the one that has the money and they will decide whether or not the small business owner is a good risk. That’s not a decision we make.”
While Pitot said she doesn’t think banks should be vilified, because many of them locally show interest in working with the YWCA’s Women’s Center, women still have a much harder time accessing capital for their small businesses, and the same is true for immigrants and other minority groups.
“You look at corporate America, it’s still very much geared toward meeting the needs of white middle- to upper-class folks— primarily 96 percent led by men,” she said.
Local Women Business Owners Share Their Stories
When Coralie Satta, owner of Ghini’s Cafe, started cooking with her grandmother while growing up in France, she knew she found her passion in life. She started working in Tucson’s restaurant industry when she was 14, but her experience at that time was far from a dream come true.
“I can tell you that I was sexually harassed all the way up,” she said. “These were my bosses offering me a raise if I were to do some sort of favors for them. I find that repulsive. I don’t think it happens on the flip side for men.”
At 22, Satta opened Ghini’s Cafe and said immediate challenges became hiring men twice her age and trying to get people twice her age to listen to her. In addition, she said the competitive nature of the restaurant industry – striving to be the quickest, friendliest, most affordable spot – makes it inherently tough every day.
“In order for me to do that, I have to make sure that I’m getting the best products delivered to my door,” she said. “That means that they have to respect me as a business owner and I have to make sure that I assert myself that way. I think yeah, as a female, it is a little bit tougher to get respect from the people that work with you.”
Jo Schneider, owner of La Cocina restaurant and co-founder of Bentley’s House of Coffee and Tea, has been in business for over 30 years, yet she said she was told “no” when seeking funding up until two years ago.
While she can’t say for sure if being a woman has made people view her differently throughout her business processes or affected her access to funding, she said the city has not been a very generous lender in general.
“I know that is certainly is not easy being a woman,” she said. “I’m not a very good player – I don’t know how to play the game. So I’ve never really been offered much from the City of Tucson as far as financial backing. I tried; believe me, I’ve tried.”
Anna Perreira’s investors for Yellow Brick Coffee in Tucson are her family members, a trend not uncommon for many women small business owners. She said expanding the business was one challenge she ran into because early on, her capital limited how much of the shop she could grow at one time.
“I don’t think I’ve ever looked at a situation that I’ve encountered at Yellow Brick as not being available to me because I’m a woman,” she said.
Suzana Davila, owner of Café Poca Cosa, uses her roots from Sonora, Mexico, and her travels throughout the rest of Mexico as inspiration for her restaurant. When she first opened the restaurant’s doors, she only had about six tables, and downtown Tucson was not the hotspot it is today.
Davila said she started with the little bit of money she had already to slowly expand the restaurant and the menu, and never felt like being a woman made people treat her differently throughout her process.
“I’ve always been a very strong woman, and I come from a family that most women are very strong,” she said.
Despite the obstacles, all of these women agree that they wouldn’t want to be in any other professional field. Satta said one of her favorite parts of her job is when customers tell her they have great memories from her restaurant.
“Just don’t give up,” Schneider said. “If it’s what you want, don’t give up. I can’t tell you how many times I have had very little to no money in the last 30-something years since opening a business. Hard work does pay off – it just does.
“Believing in something and dreaming in something, and not giving up on that goal and that dream, I think really does make or break your life. At least my life.”
Jessica Suriano is a reporter for Arizona Sonora News, a service from the School of Journalism with the University of Arizona. Contact her at jessicasuriano@email.arizona.edu.
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