Financial Resilience: How Women Entrepreneurs Are Thriving

Women business owners face unique challenges in addition to those common to all entrepreneurs, such as managing employees, maintaining customer relationships, and executing effective marketing campaigns. Chief among these additional hurdles is accessing capital. A recent Bank of America report, the 2023 Women & Minority Business Owner Spotlight, found that 29% of women business owners do not believe they will ever have equal access to capital.

Barriers to Capital Access

According to research highlighted by Kiplinger, women business owners are less likely to receive loan approvals from financial institutions due to biases against female business leaders. This is particularly frustrating given evidence that women entrepreneurs are lower credit risks compared to their male counterparts. A study by ICA and CNote found no significant difference in loan default or delinquency rates between women of color and other borrowers. Furthermore, the probability of defaulting on loans was 2 to 4.5 percentage points lower for women than for men. Despite this, women received lower loan amounts and were charged higher interest rates on average.

The Venture Capital Gap

The venture capital (VC) landscape remains particularly challenging for women. In 2022, startups with all-women teams received only 1.9% of venture capital funding, down from 2.4% in 2021, according to TechCrunch. Research shows that women pitching to venture capitalists often face prevention-focused questions, which are more risk-averse, compared to the promotion-focused questions directed at men. Additionally, investors tend to favor entrepreneurs who share similar backgrounds, placing women at a disadvantage.

Gloria Kolb, CEO and co-founder of a technology company, notes that women’s honesty can work against them. Women often present realistic projections, while men frequently overstate figures, leading investors to discount women’s numbers and provide lower levels of funding.

Progress Through Alternative Financing

Despite these challenges, several promising trends are emerging. The 2021/22 Global Entrepreneurship Monitor (GEM) Women’s Entrepreneurship Report highlights the rise of women’s angel investment groups, women-focused investment firms, and gender-smart impact investing. Women-focused incubators and accelerators are also providing supportive environments that help overcome network barriers and attract more investment capital.

Adapting to Challenges

Women entrepreneurs have shown remarkable resilience and adaptability in the face of financial challenges. The GEM report indicates that nearly half of women early-stage entrepreneurs see new business opportunities arising from the pandemic. About 25% of women-owned startups adopted new digital technologies due to the pandemic, and over half plan to integrate more digital solutions into their businesses. Women entrepreneurs are also active in global markets, with many reporting significant portions of their customer bases outside their home countries.

The Need for Systemic Change

Despite progress, systemic barriers remain. Women entrepreneurs often face negative stereotypes and struggle to access essential resources. Family obligations, referred to as “the motherhood penalty,” can also impede their business efforts. Furthermore, the lack of access to robust network connections is a significant obstacle. The GEM report found that women are 11% less likely than men to know other entrepreneurs, which impacts their ability to navigate the startup and growth phases effectively.

Resilience and Determination

Women entrepreneurs continue to demonstrate resilience and determination. The GEM report shows that women are just as undeterred by the fear of failure as men when it comes to business startups and growth. Women also tend to stay with their businesses longer than men, showcasing their commitment and perseverance.