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Resources | ESG and Diversity | March 2, 2022

How to Improve Access to Business Funding for Women

Access to funding or cash remains a challenge for many women-owned businesses, limiting their ability to grow and thrive.


woman working in a manufacturing shop on a phone

Access to funding or cash remains a challenge for many women-owned businesses, limiting their ability to grow and thrive. 

It seems like every week the headlines trumpet the achievements of women-owned companies, from local bakers who make Instagram-worthy wedding cakes to big names like Spanx’s Sara Blakely or Shark Tank’s Lori Greiner. The numbers tell the story. In 2019, women-owned companies earned a whopping $1.8 trillion in receipts and employed 10.1 million people in America alone, the US Small Business Administration reports. And around the world, more than 250 million women run their own businesses, Babson and Smith colleges reported in a study.

Despite these impressive stats, access to capital remains a challenge for many women-owned businesses, with data from two Bank of America studies showing that almost 60% of “women entrepreneurs say they do not have the same access to capital as their male counterparts, and nearly a quarter believe women will never have equal access to capital.” 

Additionally, 42% of women-owned businesses have never sought a line of credit or a loan.

“60% of women entrepreneurs say they do not have the same access to capital as their male counterparts, and nearly a quarter believe women will never have equal access to capital.”
Bank of America Study

In the startup world, fledgling businesses with at least one woman on the founding team received a measly 13% of venture capital, according to Harvard Kennedy School. In a global report, the World Bank noted that “men are more likely to borrow and save to start, operate and expand businesses than women” – a fact that’s true across the board whatever a country’s economic level.

With women undeniably making a huge impact on the world economy, hurdles to capital are a drag on their potential. The lack of access prevents women from taking their companies to the next level and undermines operational budgets that keep the lights on. To combat this persistent problem, C2FO lays out several remedies that may go a long way in eliminating barriers to capital and helping to turbocharge the women entrepreneurs of today and tomorrow. 

Eliminate or change business loan requirements

Many women around the world do not tap banks for business loans because some of these institutions require collateral, such as a house or a plot of land, and it’s more often the case that women do not have their names on the property deeds, according to the World Economic Forum.

Instead of asking these women to meet a traditional set of loan requirements, such as putting up collateral, traditional lending institutions can instead use other methods to perform a credit check: records of business performance, cash flow, savings history and other metrics. This kind of move can pay dividends because data show that women are better savers, are less impulsive investors and earn better investment returns. Lending to women-owned businesses is a smart bet!

Raise awareness of existing networks and resources

It can be fun and rewarding to be a woman business owner. Still, it can be isolating too if you are narrowly focused on making sure regular operations run smoothly or you are always trying to put out the fire du jour. 

In such cases, it’s vital to raise awareness of existing business networks and resources geared toward women business owners so they may overcome the unique challenges that come with their position. These networks and resources provide mentorship, important information and contacts of potential investors.

“Studies show that men have more social connections that enable them to access business opportunities, information and contacts than do women,” a World Bank report states.

Municipalities and local chambers of commerce can help by raising awareness about existing networks and resources for women business owners, such as the US Small Business Administration’s Office of Women’s Business Ownership, National Women’s Business Council, WEConnect International and more. These organizations are just the start of a long list of resources eager to help women-led businesses.

Offer more entrepreneurial training 

Many women business owners have enormous passion and drive, but sometimes a lack of training can hamper even the savviest person. That’s why it’s important to address these deficiencies with special programming that understands women’s unique position and the challenges they face in the business world. Study after study shows that training pays off.

“Three years after participating in training, female entrepreneurs had 18% higher sales and 15% higher profits. They also had improved mental health and a better standard of living,” according to a report from the International Labour Organization.

This type of training doesn’t have to be MBA-level but can be educational modules through local organizations, such as the 60-hour entrepreneurial training program from the Women’s Enterprise Development Center, a nonprofit organization serving Westchester County and the Hudson Valley in New York state. In the European Union, young women can tap the Young Female Entrepreneur Program (YFEP), which is geared toward fostering “an entrepreneurial mind-set and related skills in young women with a weak socioeconomic background.” These are just two examples that women can tap for training.

Boost women’s representation in the venture capital pipeline

Venture capital is a serious driver of entrepreneurship and innovation, but women historically have not been getting their fair share of this pie. 

For example, in the first three quarters of 2021, founder teams composed of all women got 1.9% of venture capital in America. This was a decrease from 2.2% in 2020. The results from the European Union were also poor. Women founder teams received only 0.7% – down from 2.2% in 2020, according to a World Economic Forum report.

“The lack of investment in women means many opportunities are being missed,” the report stated. “Over a five-year period, for every dollar of venture capital invested, women-led or co-led startups generated 78 cents of revenue, compared to 31 cents for startups led by men only. On average, companies with more diverse leadership teams report almost 20% higher revenue from innovation.”

Increasing women representation in venture capital firms is one potential solution. As TechCrunch noted: “Women investors are up to 3x more likely to fund women founders.”

The article also noted that when VC firms added female partners, the firms reaped “9.7% more profitable exits and a 1.5% spike in overall fund returns.” 

Increase support from corporations 

Major corporations can help provide a runway for women-owned businesses by offering tailored opportunities such as greater financial support, mentorship, networks, capital directories and other platforms.

Diversifying their supply chain can be one such tactic that corporations can deploy, while also offering technical and financial support. One such method is C2FO’s Opportunity Marketplaces. 

With C2FO Opportunity Marketplaces, corporations provide a platform where diverse suppliers can request accelerated payments on their invoices at competitive rates. These early payments give diverse suppliers working capital to build up their businesses faster, while bypassing traditional lending institutions. 

It’s a risk-free opportunity that should pay dividends in the increased success of a diverse supplier and the greater health of a corporation’s supply chain. Read more about how C2FO Opportunity Marketplaces can help diverse suppliers here.

The bottom line

Women-owned businesses are making their mark on the economy, but they need greater access to the capital that will allow them to thrive and grow. It starts by connecting women entrepreneurs to networks and training, and it will require new standards for lending and greater representation for women in venture capital. 

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