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The average annual revenues of women-owned business rose 68% in 2019, to $384,359 from $228,578 in 2018, according to the annual study of women-owned companies by Biz2Credit.
However, while this growth is impressive, male-owned businesses generated a much higher average annual revenue: $752,154 in 2019, up jump from $473,157 in 2018. In direct comparison, firms owned by men made $367,795 more revenue on average than women-owned businesses last year, according to Biz2Credit research, which examined 30,000 companies nationwide in more than 20 industries, including retail, health care, hospitality, construction and professional services, among others.
The number of women-owned businesses that applied for funding in 2019 increased slightly, although their average loan amounts went down from $48,341 to $40,513 in 2019. The most common type of funding was working capital.
The study also found that while the average credit score for women-owned businesses increased from 588 in 2018 to 590 in 2019, they trailed the scores of their male counterparts (613) by 23 points.
There is no doubt that women-owned companies are performing better than they have at any other time in U.S. business history. However, the factors that have helped buoy firms owned by women are also bolstering firms owned by men – and it seems to a greater extent.
The male advantage can be attributed to the fact that they have been in business longer, and these entrepreneurs have had time to develop strong networks in industries like IT, construction and logistics. But economists predict that in a few years female business owners should catch up to their male counterparts and things may start to even out.
On the upswing
That trend is already happening. Women’s entrepreneurship is on the rise driven by many factors including a strong U.S. economy and an increasing desire among women of all ages to start and run their own companies. Entrepreneurship is on the rise by minority women, and overall, there are now 12.3 million women-owned businesses in the U.S., according to a report by American Express and SCORE. In 1972, when there were only 402,000 women-owned businesses.
The high number of SBA loans made last year has been beneficial to both male and female entrepreneurs. Nationally, SBA 7(a) loan volume in FY 2019 reached more than $28 billion and more than 58,000 firms received government-backed financing. The SBA’s flagship 7(a) program offers guarantees on loans to small businesses of up to $5 million on reasonable terms and conditions.
Because of the government guarantees, banks were willing to make SBA loans to businesses that might not otherwise qualify for traditional bank loans, such as working capital and term loans. Support has become increasingly available to women entrepreneurs.
For instance, the SBA recently announced that nonprofit organizations, state and local agencies, and institutions of higher learning are eligible to compete for funding of up to $300,000 to deliver entrepreneurship training to women service members, women veterans, and women military spouses. Up to six awardees receive a total of $300,000 in grants administered by SBA’s Office of Veterans Business Development to participate in the Women Veteran Entrepreneurship Training Program. The funds will be used to cover the costs of educating women service members and veterans, as well as women military spouses who are interested in starting or currently own a small business.
“Women veteran entrepreneurs have contributed in a major way to the growth of the U.S. economy, bringing in $10 billion in receipts over a five-year period,” said Larry Stubblefield, associate administrator for SBA’s Office of Veterans Business Development. “The SBA is committed to supporting women veterans with the training and resources they need to start, grow or expand a small business.”
“I look forward to helping elevate female entrepreneurs and our military veterans, expanding access to SBA resources among entrepreneurs in disadvantaged communities, and continuing to prioritize disaster relief,” said new SBA Administrator Jovita Carranza, who was sworn in on Jan. 14.
Getting to parity
“It’s encouraging that the percentage increase in revenue for women-owned businesses outpaced male counterparts. However, to be at parity, these businesses would need to almost double their revenue — a challenging feat even in the best economic times.” said Adrienne Garland of She Leads Media, an expert on women’s entrepreneurship.
“That said, I remain eternally optimistic that women’s businesses will continue to deliver strong revenue growth, and expertly manage expenses to produce more efficient and profitable companies. This, coupled with consumer trends toward buying from companies committed to social responsibility and humanity, will lead to greater access to capital and ultimately further the positive economic impact of women-owned businesses.”
According to Biz2Credit figures, the top 10 states in 2019 for applications from women-owned businesses were Texas, California, Georgia, New York, North Carolina, Ohio, Pennsylvania, Michigan, Illinois and Tennessee. Entrepreneurship is booming in Texas, particularly in and around Austin, and in other tech centers, such as Silicon Valley and New York City.
Nearly one quarter of loan applications came from women-owned businesses in the Services category, which includes translation and public relations services, hair and nail salons, and cleaning companies. Next came Retail (18.4%), Food & Hospitality (12.6%), Health Care and Social Assistance (7%), Arts & Entertainment (5.7%), and Construction (5.6%).
The strong economy is like a high tide that raises all the boats. When businesses owners are doing well, they can invest in their companies. With strong financials and an overall atmosphere of optimism, borrowers have confidence in expanding their enterprises.
The money spigot
Meanwhile, lenders are willing to make small business loans. Advanced financial analytics has dramatically reduced default rates for banks and other lenders, and those that make SBA loans have their risk mitigated by the government guarantees. This makes it very attractive to provide capital to small businesses.
Big banks approved 28.3% of the loan applications they received in January 2020, a post-Great Recession record, according to the most recent Biz2Credit Small Business Lending Index released on Feb. 11. Small banks, which process a lot of SBA loans are granting more than half of their funding requests.
Like other women business owners, Anna DiCenso of Rino’s Restaurant in Boston, an eatery featuring southern Italian cuisine that has been featured on the Food Network’s “Diners, Drive-ins and Dives,” was surprised at how quickly she was able to secure working capital for the down period in the restaurant business that comes annually during the winter months.
“After the new year, business lags a little bit. Sometimes we see a 30% decrease in our numbers,” DiCenso said. “We did a $30,000 small business loan and during a recent break hired a painter come in and do some touch ups to give the place a fresher look. The loan provides us with a cushion for leaner times.”
She said it the funding process took less than a week.
DiCenso, who describes her restaurant as “very successful,” has advice for women who want to pursue their dreams of business ownership.
“You have got to stay positive, put your foot forward, and go for it,” DiCenso said. “To any woman out there who looks to start a business, I say go for it and shoot for the stars.”
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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.
— By Rohit Arora, CEO of Biz2Credit