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  • Writer's pictureAntonise De Wet

(Financial) Challenges female entrepreneurs face

Over the past few decades, women have made great progress in the economic sector, and this progress has increased as the United States continues to recover from the pandemic's consequences. In reality, women founded 49% of new firms in the United States in 2021, up from 21% in 2019, according to a recent survey from Gusto(opens in new tab).

Even while starting a new business may seem exhilarating, women business owners must deal with a number of challenges that their male colleagues may not always have to. Family obligations, ingrained biases, and changing gender norms make it particularly difficult for women to start and operate successful businesses. An unsustainable working environment can also be produced by inadequate outside assistance and counsel. It's challenging to be an entrepreneur. Business owners face a variety of challenges in order to succeed, from issues with cash flow and marketing to retirement savings. Despite the growing proportion of women-owned enterprises in the United States, these difficulties are particularly noticeable for women. Increases in operating costs were the primary factor in last year's decline in profits. According to Rohit Arora, CEO of Biz2Credit, "Business expenses increased dramatically in 2021, especially labor, fuel, raw material, and inventory prices, which shot through the roof as a result of supply chain disruption. Women-owned businesses are particularly badly hit by these economic challenges."

In 2021, female-owned enterprises generated an average profit of $88,995. This was much less than both the average profit for firms owned by males in 2021 ($136,147) and the average profit for businesses owned by women in 2020 ($119,654).

In the poll, female business owners' average credit scores were 580, while male business owners' average scores were 594.

Here are some common obstacles that women business owners must overcome:

1. Insufficient resources

Many women find it difficult to secure funding for their businesses. When they do, the loans are offered in smaller sums than those to men. Male-owned businesses that obtained SBA funding received $156,279, while female-owned enterprises only earned $59,857. The likelihood of venture investors supporting a company with a female CEO or controlled by a woman is much lower.

A young company depends on funding to survive. Numerous enterprises fail in the absence of sufficient finance. Starting your business as a side job is one approach to get out of financial trouble. Obviously, depending on the kind of business you wish to start, this is not always possible. 

2. Inadequate system of support

According to a survey, 48% of female business owners said that their ability to advance professionally was hampered by a lack of support. Men continue to rule the business world, making it challenging for women to enter the virtual boardroom and establish powerful professional networks. Both men and women need connections, money, and emotional support to launch their ideas.

Joining Facebook and LinkedIn groups for women entrepreneurs, as well as going to conferences and events, are two ways to acquire the support you need.

3. Effective finance and credit for businesses.

It can be difficult and complex to figure out the best strategies to finance a business and support expansion. Choosing the best strategy, whether it be through conventional lines of credit, outside investment, or cash, can be difficult. The process is frequently even more difficult for women. According to researchers(opens in new tab) from Columbia Business School and London Business School, companies led by women are 63% less likely than those led by men to receive venture capital (VC) funding. Financial institutions are less likely to approve loans for women merely because they have prejudices towards female company executives (opens in new tab). According to research, when women pitch venture capital, questions with a prevention-code are asked of them as opposed to ones with a promotion-code.

Working with an independent consultant like Kotini and Kotini can occasionally assist you in selecting the course of action that is ideal for you and your unique objectives. We can assist you in finding alternate funding sources, such as grants or loan programs, that you may not have previously considered. We can also warn you if you are taking on too much debt.

4. Lack of assurance

Women frequently lack the self-confidence needed to achieve. We frequently undervalue our abilities and worth. We lack confidence more because of how other people will respond than because of what we know to be true about ourselves. We are naturally afraid of being perceived as arrogant or conceited.

Finding a mentor or hiring a coach is the finest thing you can do to increase your confidence. In addition to offering advice, a coach should also encourage you and help you recognize your accomplishments. Until you have faith in yourself, a coach or mentor can believe in you.

Final thought

The survey discovered a sizable income discrepancy between businesses run by men and women using Biz2Credit. Specifically:

  • 33% of business loan applications are from women, compared to 67% of applications from men.

  • In 2020, the average loan size for firms owned by women was $49712, 41% less than the average loan amount for businesses controlled by males, which was $83,198.

  • Annual Revenue on Average: In 2021, businesses owned by women made $475,707 less in average revenue than enterprises owned by males ($675,643).

  • Program for Paycheck Protection (PPP): Women-owned firms made up over half (49%) of the applicants on the Biz2Credit platform for round two of the PPP loans, but these companies only received approval for an average credit of $23,101 as opposed to the average PPP loan of $36,348 for businesses owned by men.

On the plus side, women started new enterprises at a faster rate during the pandemic, claims Arora, which is one of the reasons average yearly revenue for women-owned firms fell.

In other SBA-related news, Administrator Isabella Casillas Guzman recently disclosed the organization's intentions to elevate the Office of Women's Business Ownership (OWBO) such that it will directly report to the Office of the Administrator.

There is little doubt that these are difficult times for all small business owners, but women are particularly affected since, as Arora noted, they often run newer, smaller businesses. A mentor can help if you're a woman business owner and need assistance. You can reach out to Kotini and Kotini anytime! We are all about empowerment!

Paavan Kotini


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