Women who own businesses encounter the same daily hurdles as any entrepreneur, like finding and keeping employees, managing customer relations, and devising effective marketing strategies. However, they also confront unique challenges. For many women, the main obstacle is accessing funds. The 2022 Women & Minority Business Owner Spotlight from Bank of America shows that 29% of women entrepreneurs doubt they’ll ever gain equal access to capital.
Women business owners face hurdles in securing loans due to biases against female leaders, as reported by Kiplinger. Surprisingly, research by ICA and CNote indicates that women entrepreneurs pose lower credit risks than their male counterparts. They have a lower probability of loan default—2 to 4.5 percentage points less than men. Despite this, women typically receive smaller loans and are charged slightly higher interest rates. On average, men receive $110,000 compared to women’s $86,000—a $24,000 lending gap. Men also enjoy lower annual interest rates (8%) than women (9%).
Venture capital (VC) funding for women is dismal. According to TechCrunch, in 2022, startups with all-women teams received only 1.9% (around $4.5 billion) out of the approximately $238.3 billion in venture capital funding. This is significantly less than the 2.4% raised by all-women teams in 2021.
However, there are signs of progress. The Global Entrepreneurship Monitor’s (GEM) Women’s Entrepreneurship Report highlights promising financing trends, such as the emergence of women’s angel investment groups, gender-focused investment firms, and gender-smart impact investing. Women-focused incubators and accelerators are also cropping up, providing supportive environments for female founders and aiming to overcome network barriers to attract more investment capital.
The GEM report also reveals that around 25% of women-owned startups were prompted by the pandemic to adopt new digital technologies, with over half planning to integrate more into their businesses. Moreover, female owners of growth-oriented, highly innovative businesses target national and international markets, with 25% of their customers located outside their countries. Globally, women entrepreneurs are as likely as their male counterparts to offer innovative products or services (31.4% women vs. 33.9% men).
