A love-hate relationship
Women have traditionally had a love-hate relationship with money. On the one hand, we love to spend it (can you say Gucci or Jimmy Choo), but we hate to talk about it. Many women were brought up that it’s impolite or embarrassing to talk about money. In one study conducted by Merrill Lynch, 61% of women said they would rather discuss the details of their own death than money! Women also tend to have a more complicated relationship with money than men. For women, money represents not only purchasing power but also security and the ability to care for their families. This creates an emotional connection which can make money more frightening to deal with. Unfortunately, these attitudes around money are impacting the ability of female entrepreneurs to secure the funding they need to grow their businesses. According to the 2018 State of Women-Owned Businesses reportby American Express, “there is a significant gap between the number of women who start businesses and those who commit to growing them. Unlocking the potential of women-owned businesses represents a powerful opportunity for economic growth.” It’s time for female entrepreneurs to overcome the money taboo, ask for what they need and embrace what money can do.
Women don’t ask
We’ve seen the statistics many times; women don't ask for raises as often as men. Linda Babcock, Carnegie Mellon University economics professor and co-author of Women Don’t Ask, says men are four times more likely than women to ask for a raise—and when women do ask, they typically request 30% less than men do. This trend applies to female entrepreneurs as well. According to data from the Kauffman Foundation, 40% of new entrepreneurs in the U.S. are now women, and the number of new women-owned businesses is growing at double the rate of male-owned businesses. In spite of this incredible growth, women are not asking for the funding they need to grow their new ventures. A recent study published in Venture Capital showed that females are less likely to ask for outside funding than their male counterparts. This phenomenon is supported by a survey from SCORE with data collected from more than 20,000 U.S. small business showing that only 25% of women entrepreneurs seek financing over the lifespan of their business. Another study by Fundera revealed that female entrepreneurs who do seek funding ask for roughly $35,000 less than men do. As Susan Sarandon’s character Louise Sawyer famously declared in the movie Thelma and Louise, “you get what you settle for.” So, how can we get women to ask for the funds they need to grow their businesses? It all starts with the right mindset.
The mindset shift
The first step we can take to shift women’s mindset around money is to just start talking about it! Women don’t talk about money in our society nearly enough. It is critical to encourage conversations around money and finances between friends and family as well as in the press and schools. Education is also important. The Small Business Administration (SBA) is a fantastic starting point for female entrepreneurs launching new businesses. Some other resources to consider are the American Business Women’s Association, the National Association of Women Business Owners and the Women’s Business Enterprise National Council. Finally, mentors are a vital component to learning and business success. Research by Gallup shows that adults with access to a mentor are five times more likely to start a business than those who don’t have a mentor. Also, SCORE’s report shows that entrepreneurs who seek mentorship significantly increase their chances of success regardless of gender. As female entrepreneurs change their mindsets around money, they will be able to take advantage of the vast amount of financing options available to them.
There are options
While seeking funding to start a business can be intimidating, there are many options.
Loans: This is the first and most obvious option. SBA loans are great for women who need a long-term business loan and have strong credit. Also, online lenders offer almost any type of business financing and can do so relatively quickly. Some to consider include Funding Circle, Lending Club, OnDeck and Kabbage among many others. A business line of credit is another option that will provide additional flexibility. This option gives you access to a specific amount of money although you don't need to use all of it. Finally, there are microloans explicitly created for women-owned businesses with smaller capital needs ($50,000 or less). The SBA is one option that provides funds to nonprofit community-based intermediary lenders that have experience managing and lending. You as a borrower would work directly with these preselected intermediaries.
Grants: Many government agencies, nonprofits and private organizations provide small business grants, and several of these are open to women only. A grant is essentially free money that you don't have to pay back. Some examples are the Eileen Fisher Women-Owned Business Grant and the Girlboss Foundation Grant. Also, don't forget to check out state and local options.
Crowdfunding: Crowdfunding platforms like Kickstarter have enjoyed incredible success over the past several years. For women-led businesses and startups, crowdfunding is now considered an alternative financing solution. iFundWomen is another crowdfunding platform gaining popularity. Named by Nasdaq as one of the “10 Best Sources of Funding for Women Entrepreneurs,” iFundWomen takes a comprehensive approach to startup funding by offering a flexible platform, coaching and a private community. Founder and CEO Karen Cahn says,
"My mantra is all the money for all the women now. The reality is: money is power, and when women are financially independent…we can control our own destiny. That’s what I’m all about as a person and an entrepreneur.”
Money can be a great tool to help us reach our goals and take care of the people we love. As women, we owe it to ourselves to achieve financial success. The planet needs us and our talents. Women can have a remarkable economic impact on the world—let’s embrace what money can do and break the taboo.