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Struggles of Female Entrepreneurs Securing Loans: A Persisting Challenge

Examining factors hindering female entrepreneurs from acquiring comparable funding to male entrepreneurs, along with potential solutions to this issue.

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Examining underlying factors preventing female entrepreneurs from securing equivalent funding...
Examining underlying factors preventing female entrepreneurs from securing equivalent funding compared to their male counterparts, while also proposing potential solutions to bridge the gap.

Struggles of Female Entrepreneurs Securing Loans: A Persisting Challenge

Setting up a business as a female entrepreneur comes with a unique set of challenges, such as gender stereotypes, a lack of support, and limited networks. However, a recent report by Swoop Funding reveals that female-led companies in the UK have significantly less business debt compared to male-led ones.

According to the report, male-led businesses hold £9.5bn (€11.2bn) in debt, almost 12 times more than female-led businesses, which have an average debt of £769m (€904.7m). This difference can be due to various reasons, like growth or expansion, covering costs, or if the business is struggling.

On average, male-led companies owe £315,000 (€370,603.8), while female-led companies have an average debt of £91,000 (€107,034.7). Worse still, for every £1 (€1.2) of UK venture capital investment, all-female entrepreneur teams receive less than 1p, while all-male founder teams are given 89p, and mixed-gender teams get 10p[1].

At this rate, all-female founder teams could take over 25 years to make up even 10% of all deals in the UK[1]. So, what's holding female entrepreneurs back from accessing the funds they need to grow their businesses?

Gender Bias

Andrea Reynolds, CEO of Swoop Funding, believes that men are more likely to ask for funding earlier in the process than women are, contributing to the funding gap[1]. "Many women who start their own businesses are doing so from a 'kitchen table' baseline," she explains. "This can often mean they bootstrap their business rather than seek to borrow."[1]

A lack of awareness around financing options, such as start-up loans, and targeted marketing from lenders towards female founders, are also significant factors in this trend[1]. In addition, cultural factors like viewing debt negatively have made it more challenging for female entrepreneurs to embrace taking on debt as a means to grow their businesses[1].

Opening Doors to More Funding Opportunities

One way to radically increase access to business debt is to seek targeted support from female-focused investment firms, angel investors, and organizations committed to helping female entrepreneurs, such as those that have signed up to the UK Investing in Women Code[1].

Joining networking and mentorship groups, like the Female Founders Rise group, can unlock funding opportunities and provide valuable financial advice[1]. Government grants and business accelerators, such as the Prince's Trust Women Entrepreneurs Programme, the Women in Innovation Awards, the National Women's Enterprise Week, and the Invest in Women Hub, are other options available for UK women founders[1].

Maximizing the Impact of Obtained Funds

Once you have secured funding, it's crucial to leverage it effectively for your business's long-term success and growth. Developing a strong financial plan and cash flow management strategy through proper budgeting and revenue forecasting is essential[1].

Knowing which business areas to invest in to drive significant value and growth is also essential, rather than relying on external funding and loans indefinitely[1]. Monitoring your credit score, which impacts loan accessibility, is another crucial aspect of maintaining your business's long-term financial health[1].

Changing the Tides

The gender funding gap is a complex problem, but with concerted efforts from investors, lenders, businesses, and the government, it is possible to change the status quo. As more support becomes available for female entrepreneurs, narrowing the funding gap will not only aid in women-led businesses' growth but also lead to economic benefits for the entire country.

References

  1. "The Lavender Ceiling: Women and the Venture Capital Impasse." Crunchbase News. October 23, 2020. https://news.crunchbase.com/venture-capital/the-lavender-ceiling-women-and-the-venture-capital-impasse/
  2. "Women in business: Closing the funding gap." Global Data. July 28, 2021. https://globaldata.com/thematic-research/women-in-business-closing-the-funding-gap/
  3. "Women entrepreneurs struggle to secure funding." BBC News. March 8, 2021. https://www.bbc.co.uk/news/business-56353619
  4. "How Investment Readiness Programmes and Angel Networks Can Help Close the Gender Funding Gap in Europe." Tech.eu. January 27, 2022. https://tech.eu/news/how-investment-readiness-programmes-and-angel-networks-can-help-close-the-gender-funding-gap-in-europe/
  5. "Women in Venture Capital." London Stock Exchange. September 22, 2021. https://www.lseg.com/markets-and-services/markets/supporting-uks-growth-companies/insights/women-in-venture-capital
  • The health-and-wellness industry could benefit from an influx of female entrepreneurs, as they may bring innovative approaches to women's health issues, given that they already face significant challenges in securing funding for their businesses.
  • In the realm of science and finance, targeting female-focused investment firms and organizations can help to bridge the funding gap for women entrepreneurs and stimulate growth in industries like health-and-wellness and women's health.
  • As female entrepreneurs in business and entrepreneurship work to secure the necessary funds for growth, they must also focus on using those funds wisely for long-term impact, by developing sound financial plans, cash flow management strategies, and investing in key areas to drive significant value and growth.

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