Lending More Than an Ear
A dramatic increase in the number of female enterpreneurs has banks listening like never before to women business owners

According to the National Foundation for Women Business Owners, as of 1996 there were 98,900 women-owned businesses in Kentucky (including part-time firms), employing 213,400 people and generating $23.4 billion in sales. Between 1987-1996, the number of women-owned businesses increased 70.1 percent.

Recognizing a void in the availability of loans and startup capital for women business owners, several area financial institutions have initiated special services and programs designed especially for women. These activities range from information sessions for women just entering the business world to assistance in gaining access to regional and national organizations.

Serving a New Niche

Last September, Banc One Corporation announced a major initiative in 20 major cities, designed to reach out to women entrepreneurs, including 1,000 such businesses in Kentucky and 300 in Central Kentucky alone. Sales representatives pay visits to these firms, giving them information on their range of services, which include a free cassette entitled "Getting the Credit You Deserve," an invitation to join Women Incorporated (a national membership organization), and access to credit through Bank One Business Solutions for Women program.

Regional Vice President for Corporate Communication Nancy L. Norris emphasizes that Bank One's approach is different. "Instead of creating a special department to meet women business owners' financial needs, Bank One is dedicating its entire sales force to this effort. Bank One has not created 'special' products for women business owners. Our business banking products are designed to fulfill the needs of businesses – whether they are owned by men or women."

Commercial lender Karen Kelley points to Central Bank's corporate partnership with the National Association of Women Business Owners as a catalyst for their work with female entrepreneurs in this area. "Part of working with them is having access to their Angel Network – a program that involves successful women who want to give something back to those just getting started in business."

Numbers Tell the Story

With women starting businesses at twice the national average rate, women are expected to run 40 percent of the country's small companies by the year 2000. Yet, according to the Small Business Administration's Office of Women's Business Ownership, only eight to 10 percent of SBA-guaranteed business loans go to women, primarily because of the sheer lack of loan applications from them.

A 1995 survey conducted by the Governor's Task Force on Kentucky Women-Owned Business found that almost half of the 800 respondents had no bank credit whatsoever. When asked to name the number one barrier to development, 39 percent said lack of available capital. Other telling statistics from the sample: 32 percent had to have a co-signer or spouse sign for a loan; 32 percent were denied financing due to limited assets or collateral; 16 percent perceived mistreatment based on gender.

According to the survey, the service sector accounts for 28 percent of female-owned businesses, with retail at 22 percent and construction at 5.2 percent. In addition, respondents possessed a good amount of experience, with almost one-third having been in business 6-10 years as of 1994.

Noah Maffitt, the SBA Women's Business Center's Director of Internet Communications, notes that there are several websites to visit for updated information on access to capital for women business owners:

• Women's Lending Program (Wells Fargo & NAWBO) 1-888-767-2444
• National Association of Women Business Owners (301) 608-2590
• Women, Inc. 1-800-930-3993
• U.S. Small Business Administration Answer Desk 1-800-827-5722
• SBA Office of Women's Business Ownership (202) 205-6673
• LFUCG Small Business Development Center 257-7668
• National Foundation of Women Business Owners: www.nfwbo.org
• Women In Technology International www.witi.org
• SBA Women's Business Center www.onlinewbc.org or www.sba/gov/womeninbusiness

The National Foundation for Women Business Owners site yields a wealth of information for any woman entrepreneur, regardless of her career's stage of development. Among the statistics:

• As of 1996, women-owned businesses employ one in four company workers in the U.S. – 18.5 million people.
• There are now nearly eight million women-owned businesses in the U.S.
• Women-owned businesses currently generate nearly $2.3 trillion in revenues.
• "Over the last several years, bankers have begun to recognize that the nearly eight million women-owned businesses in this country are a great, untapped market," said Susan Peterson, NFWBO chair and president of a Washington, D.C.-based communication training firm. "And women business owners have become increasingly more sophisticated in dealing with financial institutions."
• Women business owners' sources of capital have changed significantly between 1992 and 1996. Nearly three-quarters (72 percent) of women entrepreneurs are using business earnings to finance their firms, double the number four years ago. At the same time, the percent using credit cards as a source of capital has been cut in half, down to 23 percent, a level very similar to mate entrepreneurs.
• While there is growing similarity between women and men business owners' sources of capital, they use their credit for different purposes. Women use it primarily for growth and expansion; men are more likely to use it to smooth out cash flow and consolidate debt.
• Relationships with banks, reported by two-thirds of women entrepreneurs as a problem in the past, are improving. The percent reporting one or more problems in working with their banks has dropped overall by 15 percent and now is at about the same level as men.

Capital Access

The Women's Lending Program, a joint initiative of Wells Fargo Bank and the National Association of Women Business Owners, makes loans to women entrepreneurs with good personal and business credit records. After beginning in 1995 with a goal of lending $1 billion over a period of three years, the program is now committed to lending $10 billion over 10 years due to the overwhelming response. More than 50,000 women have taken advantage of the program, with a typical line of credit of $25,000.

An SBA pilot program, now officially a part of their larger LowDOC loan program, enables women to apply for loans of as much as $100,000 through SBA-approved intermediaries. The intermediaries obtain and verify the applicant's credit information, analyze her business plan's financial statements and submit an application to the SBA. If the SBA okays it, the business owner gets a pre-qualification letter saying the SBA will guarantee 85 to 90 percent of the loan, depending on its size.

David Stevens, management consultant with the Kentucky Small Business Development Center (KSBDC), notes that the SBA pre-qualification program "doesn't make qualification more likely, because it still comes down to working with a bank that will participate with SBA on the loan." Still, Stevens notes, Central Kentucky banks have a good track record working with women entrepreneurs. "I helped 22 firms get financing last year," he adds. "Ten of those were woman-owned, and none had to go through the pre-qualification program."

While U.S. Treasury statistics report only four women-owned banks in the country, given the explosive growth of women's business ownership, some of the banks now lending to women might just encounter a little role reversal with those same individuals further down the road.

Adam Bruns is a staff writer for The Lane Report.

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