In recent years, there has been a growing awareness of the injustice surrounding funding practices for women-owned businesses. Despite the remarkable progress made by women entrepreneurs in various fields, they still face numerous obstacles when it comes to accessing capital. However, thanks to the power of crowdfunding, there is a glimmer of hope for these aspiring business owners. In this blog post, we will delve into the importance of a call to action to crowdfund women-owned businesses and the impact it can have on both individuals and society as a whole. I am calling to action those who want to stop these injustices and help fund a woman owned business.
The Injustice of Funding Practices:
Traditional funding avenues such as bank loans and venture capital firms have long been dominated by men, leaving women entrepreneurs at a disadvantage. Studies have shown that female entrepreneurs receive significantly less funding compared to their male counterparts, despite demonstrating equal or even better business potential. This gender bias in funding practices perpetuates a cycle of inequality, stifling the growth and success of women-owned businesses.Entrepreneurs often encounter significant financial barriers that hinder their business growth and sustainability. One such challenge is personal credit limitations, where individuals may face difficulties securing loans or favorable terms due to their credit history. This can be particularly challenging for entrepreneurs who are starting a new venture or have faced previous financial setbacks. Additionally, women entrepreneurs face gender biases in loan approvals, with studies showing that they are less likely to be approved for loans compared to their male counterparts. This inequality in access to capital limits the potential for women-owned businesses to thrive. Furthermore, investors often display reluctance towards service-based businesses, preferring to invest in industries with tangible assets or high-growth potential. This lack of interest creates additional obstacles for entrepreneurs in service-based sectors, making it harder for them to secure traditional funding sources. These financial barriers highlight the importance of alternative funding options, such as crowdfunding, to support entrepreneurs in overcoming these obstacles and realizing their business aspirations.
The data on injustice surrounding funding:
How can women get a loan to launch a small business?
It sounds a straightforward question, doesn’t it? Surely it’s just a matter of marching into your bank, filling out the forms, supplying a business plan and all the necessary documentation and waiting for a response.Too often, though, that answer is likely to be “no”. And it is entirely possible that gender may be the reason for such a rejection.
Two years ago, a report by Democratic staffers of the Senate small business and entrepreneurship committee finally managed to nail down some numbers. While women owned 30% of US businesses, they calculated, for every dollar of conventional small business loans that they received, another $23 went to men. That juxtaposition, the staffers argued, didn’t make sense. If so many women were running so many businesses so successfully, why did so few qualify for loans?
That funding gap is important for the US economy since, according to a recent survey commissioned by American Express Open, female-owned businesses not only employ 9 million people and generate $1.6tn a year in revenue, but they are growing at five times the national average. Since 2007, more than 1,000 female-owned businesses have opened their doors every day and their hiring has grown consistently, even when that of male-owned small businesses has flagged.
If women can’t get access to capital, then those benefits will be capped.
There are plenty of valid reasons why women might not qualify for loans. The business proposals might not be robust enough. Their credit scores might not be high enough. But one study, published by the Institute of Government & Public Affairs and based on an analysis of lending in Chicago, found that even after adjusting the data to take into account factors like creditworthiness, gender has a dramatic impact on both access to loans and the size of the credit line a bank will grant to a small business owner. Not surprisingly, so does race.
Hence the CFPB’s tentative foray into cracking down on discrimination in small business lending. The agency already requires banks to collect and provide data on the gender, race and ethnicity of applicants for mortgages. Now it will ask lenders to do the same for anyone applying for a commercial loan.
This is covered under Section 1071 of the Dodd-Frank Act, and while the CFPB has been slow to get moving on the issue, in April it recruited a former Small Business Administration official, Grady Hedgespeth, to oversee the move.
Getting solid data – as opposed to the results of surveys like those conducted for American Express and the Senate committee staffers – will be a step in the right direction. But what follows from that?
There are some indications that being denied funding has less to do with the content of your business plan and more to do with who you are, and sometimes what you look like.
Consider a series of studies conducted by scholars at Harvard Business School, the Wharton School at the University of Pennsylvania and the MIT Sloan School of Management, designed to figure out what kind of investment pitches from entrepreneurs are most successful in wooing “angel” investors. It turns out that backers of startup companies prefer to invest their money with attractive men than any women, whether attractive or not – even if the content of the business proposals is identical.
It’s not surprising, therefore, that women aren’t just at a disadvantage in the universe of bank lending, but in the venture capital universe, where less than 7% of all venture capital funds are allocated to companies founded by women. (https://amp.theguardian.com/business/us-money-blog/2016/jul/17/bank-loan-business-sexism)
The Power of Crowdfunding:
Crowdfunding platforms have emerged as a beacon of hope for women entrepreneurs, offering a unique opportunity to bypass traditional funding routes. With crowdfunding, women can directly connect with a community of passionate supporters who believe in their vision and want to contribute to their success. Through compelling campaigns, these entrepreneurs can showcase their innovative ideas and rally support from a diverse pool of backers. Is this the new way of investing? Can we change each other’s destiny. Taking power away from corporate America. Can we pull a Bernie sanders in business? I’m going to try!
Why a Call to Action is Needed:
While crowdfunding has proven to be a valuable resource, a targeted call to action specifically focused on supporting women-owned businesses is crucial. By raising awareness about the funding disparity and encouraging individuals to contribute, we can collectively level the playing field and create a more equitable business landscape. A call to action serves as a catalyst for change, inspiring both women entrepreneurs and their supporters to actively participate in reshaping the funding ecosystem.
How to Support Women-Owned Businesses:
Donate to my crowdfunding campaign:
If you believe in the power of female entrepreneurship and want to make a difference, here are a few ways you can contribute to crowdfunding campaigns for women-owned businesses:
1. Back Women-Owned Projects: Browse crowdfunding platforms and actively seek out projects led by women. By becoming a backer, you can provide financial support and help bring these innovative ideas to life.
2. Spread the Word: Share compelling campaigns across your social networks and encourage others to get involved. Amplifying the voices of women entrepreneurs is vital in building a community of support.
3. Mentorship and Guidance: If you have experience in business or a particular industry, consider offering your expertise as a mentor. Providing guidance and support can significantly impact the success of women-owned businesses.
4. Collaborate and Network: Foster connections and collaborations between women entrepreneurs and other stakeholders in the business community. Building a strong network is invaluable in navigating the challenges of entrepreneurship.
The injustice of funding practices for women-owned businesses is a pressing issue that demands attention and action. Through crowdfunding and a collective call to action, we can challenge the status quo and create a more inclusive and equitable business world. By supporting women entrepreneurs, we not only empower their individual dreams but also contribute to a more prosperous and diverse society. Together, let us bridge the funding gap and champion women-owned businesses through the transformative power of crowdfunding.