This trend is being driven by a confluence of factors, including a strong economy and an increasing desire among women of all ages to start and run their own companies. There are now 12.3 million women-owned businesses in the United States, according to a report by American Express and SCORE. Compare that to 1972, when there were only 402,000 women-owned businesses, representing just 4.6 percent of all firms.
Women are willing to take on more risk, since the economy remains strong. Optimism among small business owners was the highest on record in 2018, according to the NFIB. The organization’s monthly Small Business Optimism Index also reported that owners believe the current period is a good time to expand substantially, and they are planning to invest in more inventory and are reporting high sales figures.
Statistics tell the story. Last year 1,821 new women-owned businesses were launched every day, the Amex-SCORE report revealed. Women of color founded 64 percent of those businesses.
But women still have a long way to go in order to have gender equality in the lending market. The Biz2Credit research found that the average size loan for women-owned businesses was 31 percent less than for male-owned businesses ($70,239) in 2018.
Part of this can be attributed to the fact that women are better bootstrappers and save up more money before borrowing, since women typically are more risk averse than men. The study shows that female-owned firms are younger businesses with a shorter track history of repayment of debts. It is harder for such companies to secure capital through traditional bank loans.
Nonetheless, female-owned firms are booming. Women are opening an average of 849 new businesses per day, according to American Express’s State of Women-Owned Businesses Report (2017). The study found that the number of women-owned businesses has increased 114 percent in the past two decades, and the number of companies owned by women of color has increased 467 percent. Minority women now own 46 percent of all women-owned firms, according to the report.
Lending activity from the SBA helps women-owned companies secure capital for growth. The agency facilitates federally guaranteed loans to small businesses that might not otherwise qualify for traditional bank term loans. SBA loans totaled $25.37 billion in the fiscal year that ended in October 2018. Many of the loans go to women-owned and minority-owned businesses.
“More women are realizing that they have more opportunities and are transitioning out of some areas of the workforce, SBA administrator Linda McMahon recently told FOX Business’ Maria Bartiromo. “New business creation is prevalent in the tech field. They might know how to build an app or know the latest in machine learning, but don’t know how to run a business and might want to. That’s where the SBA can help.”
McMahon also said that women are moving into the fast-growing health-care services sector.