Women Entrepreneurs Face Higher Operating Costs, Slimmer Margins: Biz2Credit
Compared to businesses owned by men, some women entrepreneurs have to deal with more obstacles such as having a tougher time securing financing.
Biz2Credit, a New York firm that pairs small businesses with financial institutions for financing, analyzed nearly 14,000 applications from around the U.S. on its platform during the past six months of 2012 and found several nuances that set women-owned businesses apart from men-owned businesses.
Small business loan approval rates for women-owned companies were 15% to 20% lower than they were for male-owned companies, according to Biz2Credit. On average, credit scores for women were 40 points lower than men.
Biz2Credit CEO Rohit Arora said based on the firm’s analysis, women tended to be more involved in retail operations, which generally have higher operating expenses and smaller margins. This may also account for the women’s lower credit scores, he added.
When it comes to operating expenses, women-owned businesses tended to have average operating expenses that were 21% higher than male-owned companies.
The pattern continued in the area of revenue. Biz2Credit found that women-owned businesses averaged 15% lower annual revenue than their male counterparts.
“Banks look at these figures and thus find women-owned businesses more risky to fund, which accounts for the lower loan approval rates for women,” Arora said.
There was one area where women and men were nearly on the same page. The average age of business for women was 40 months compared to 41 months for men, the Biz2Credit analysis showed.