Women Shut Out of Traditional Lending, Turn to Crowdfunding

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djbaxter

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Women Are Turning to Crowdfunding Because They're Shut Out of Traditional Lending
AllBusiness.com
Feb 5, 2019

The gender pay gap is real, pervasive, and expansive, and it occurs across almost all industries and occupations. In fact, it isn’t just about traditional employment - even small business owners seeking financing face similar issues.

Welcome to the funding gap.

According to data collected and analyzed by Fundera, female entrepreneurs receive fewer loans, of smaller amounts, and for higher interest rates than men. They get approved for shorter loans—which tend to be more expensive - more often than men as well. It’s yet another form of the pay gap, existing in part because of the lack of diversity and inherent biases of the people and institutions that extend loans, or agree to invest in new ventures.

Instead, more women have had to turn to crowdfunding in order to obtain the funds they need to seed or grow their businesses. Crowdfunding levels the playing field, because while investors and lenders represent a narrow slice of the population (mainly white men), crowdfunding backers are made up of a more representative cross-section of society - including, of course, women.

What is the funding gap?
Before we can understand why women fare better in crowdfunding rounds, let’s look at the state of funding and gender. Fundera broke down the individual factors that culminate in women receiving less traditional funding, and at worse rates, than men. It’ll look familiar if you’ve been paying attention to the biases and barriers women face in the workplace:
  • Women ask for less money - about $35,000 less than men, on average.
  • Women-owned businesses receive more short-term loans - which are typically the smallest loans, with the largest interest rates.
  • Women pay higher interest rates - on average, 13% higher interest rates for the same product that men receive.
  • Women have lower credit scores - this is likely due to the wage gap and affects the kind of loans women are able to access.
  • Women have worse credit utilization rates - this factor, the result of men having higher credit limits due to larger incomes, also affects the loan options available.
  • Women tend to own younger businesses - which, while it reflects recent excitement about female entrepreneurship, represents the barriers that stand in their way of their success.
When applying for funding using traditional lenders, women-owned businesses account for just 4.4% of all dollars lent to small businesses annually. Even from the SBA, which claims to prioritize lending to women- and minority-owned businesses, women receive 2.5 times less money than men do, according to the Fundera report.
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"(Despite recent gains, the VC industry is overwhelmingly white and male.) "

This is so true. And when it comes to pitching to VCs, it's easier for men because it's seen as normal for them to be assertive while a woman would come across as pushy. And in the IT industry, where VC money often comes into play, women are often under-represented, underestimated and undervalued.
 

davidlee21

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Thanks your the post djbaxter, I learnt something new today.
By reading the post in i feel these things are inter-related to women asking less salary. ( correct me if i am wrong)
 

djbaxter

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By reading the post in i feel these things are inter-related to women asking less salary. ( correct me if i am wrong)
Do you think the problem is that women ask for less? Or is it that employers won't give them more?
 

davidlee21

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That can be a factor too. When you're paid less, it's harder to save up to start a business. It's harder to get a loan. This can be one of the reasons why crowdfunding is more attractive for women entrepreneurs.
Ya, That's what a feel all things are related to women being paid less.
 

Essentialist

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Do you think the problem is that women ask for less? Or is it that employers won't give them more?
I recently had a chat with a lady at the place I am consulting currently. She told me they have a great female leader who organized a 'confidence stream' for all female workers. Amazing initiative. So, the person I was talking to confirmed that the leader quoted a research study in which she said women are generally less pushy than men (generally is the key word here) and that it's easier for male workers to get promotions, etc.

So, I think yes, they might be asking for less...
 
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