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Bank Loans Harder to Get for Women | Philadelphia Inquirer

NEW YORK - Getting a bank loan is still a struggle for many women who own businesses.

October 23, 2017  | 3 min read

Kirsten Curry has had three rejections in the last six months and is waiting to hear from a fourth bank. Curry, owner of the Seattle-based Leading Retirement Solutions, has applied to national banks, a regional bank, and a credit union. The problem is that her eight-year-old retirement-advisory firm lost money last year as it invested in technology to help it expand. Although revenue has consistently risen and her company has no debt, her expenses last year were a red flag.

"Though we know we're going to see growth, it's not necessarily guaranteed," Curry said.

A survey of businesses conducted in the summer and released last week found that 30 percent of companies owned by women among the 1,176 respondents were able to get bank loans during the previous three months, compared with half of all the owners surveyed.

The survey, conducted by researchers at Pepperdine University's Graziadio School of Business and Management and Dun & Bradstreet Corp., questioned owners of companies with up to $100 million in annual revenue.

Only 21 percent of the female business owners surveyed said they expected it would be easy to raise debt financing - essentially, loans - in the next six months, compared with 44 percent of all companies. Fewer of them said they were likely to pursue a bank loan, 67 percent compared with 75 percent of all owners.

Women were also more pessimistic about the impact on their companies of not being able to get financing - 64 percent predicted slower growth, vs. 44 percent of all business owners. Many women said they would turn to personal savings, friends and family, credit cards, and other alternatives.

Curry isn't optimistic about an approval from the fourth bank, so she and her finance manager, Jaime Humphrey, are working with a referral program to link them up with other banks.

The number of U.S. businesses owned by women grew nearly 27 percent from 2007 to 2012, rising to nearly 10 million from 7.8 million, according to the most recent Census Bureau figures. The total number of U.S. businesses grew less than 2 percent.

There aren't official tallies of lending to companies owned by women. Under federal antidiscrimination laws, banks cannot ask loan applicants about their gender, race, or ethnic background. Agencies including the Federal Deposit Insurance Corp. compile statistics on small-business lending, but those don't reflect gender or other demographic details or whether companies obtained loans or had their applications denied.

Banks track lending to women through their own surveys. Bank of America found this year that 11 percent of business owners who are women applied for loans the last two years, vs. 13 percent of owners who are men. Some banks have realized they need to be more aggressive in lending to businesses owned by women. Wells Fargo set a goal of $55 billion in loans by 2020, but surpassed that number in 2016, spokesman Jim Seitz said.

Financing issues come on top of the struggles small businesses historically have had getting bank loans. It's especially the case for the newest companies without track records showing years of rising revenue and profits - and since women have been starting companies at a high rate in the last decade, many have young businesses. They also may not have developed a long relationship with bank branch managers who might advocate for them with loan underwriters.

Academic research also has found that women who start companies have a tougher time getting loans, and that bank officers have used different criteria for them. A 2014 study by professors at Northeastern University and Babson College found that women received smaller loan amounts than men whose companies had similar characteristics such as past performance and number of employees.

"There is such a dominant conception in the world of finance that the successful entrepreneur is a young white guy," says Lakshmi Balachandra, a professor of entrepreneurship at Babson and a coauthor of the study.

Carolyn Thompson, a business owner for two decades, said she's gotten six business loans over the years because she applied at community or regional banks.

"I learned a long time ago that as a small-business owner, you can't go to a large bank," says Thompson, president of Merito Group, an employment consulting firm based in Vienna, Va. With a smaller bank, it's easier to get to know employees who have a hand in making loan decisions.