Written by Sabena Quan-Hin
on March 08, 2019

International Women's Day is a day of celebration. A day to reflect on how far we've come as a society. We've had real success in improving equal opportunity to all people, not just women. However, in examining the data, it's important to note that we still have a long way to go and a singular day is not going to be enough if we're going to make any real, lasting change. We must be working towards #IWD2020, doing everything we can to ensure equal opportunity to all.

The Problem:

  • According to the Senate Small Business & Entrepreneurship Committee, women own 30% of small businesses, yet are only approved for:
  1. 16% of conventional loans
  2. 17% of SBA-backed loans
  3. 7% of venture funds
  4. Only receiving 4.4% of total dollars in conventional small business loans made
  • Only 21% of the women surveyed said they expected it will be easy to raise debt financing in the next six months, compared to 44% of all companies
  • 64% of women predicted slower growth vs. 44% of all business owners when asked about the impact of their companies not being able to get financing
  • Women received smaller loan amounts than men whose companies had similar characteristics like past performance and number of employees (2014 study by professors at Northeastern University and Babson College)

In the past decade, women have started businesses at a higher rate, but those businesses are younger than more established businesses with proven record of profitability. These companies would not have the relationships with investment managers and would score lower from a credit risk rating due to the lack of historical information. Updates to credit risk models focused on younger, high-growth companies will level out this inherent bias, but it will take time for younger, women-led businesses to show historical information.

The Solution:

  • Investment groups/managers must adopt technology that leverages data insights rather than historical biases when determining investment criteria. Making more insightful choices regardless of sex or race, will yield higher returns and a higher percentage of female-led businesses funded.
  • Capital accountability. Investors/Board Members/Investment Groups have a fiduciary duty to eliminate bias and make the best decisions for their capital.
  • The venture and SMB industries must continue providing support and resources to women-led businesses allowing them to get the same traction and historical records as their male counterparts required for access to capital.
  • Education around Alternative Capital. There is a tremendous opportunity for investors to gain a competitive advantage by focusing on under-funded/better managed, women-led businesses. There are a number of alternative funders out there (including Corl!) that provide equal opportunity to founders that otherwise are at a disadvantage.

Education and awareness is our most important tool. Highlight the success stories and learn from errors in bias judgement. Accountability for all investors to leverage data rather than bias in investment decisions and challenge the existing stereotypes around what an entrepreneur is supposed to look like.

Corl provides funding and technology to eliminate bias in investment decisions providing higher rate of returns and equal opportunity to all. Connect with us today if you're looking for capital or looking for a way to modernize your investment process.

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