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PCBB Banc Investment Daily January 30, 2015
Banc Investment Daily
January 30, 2015

Women In Business And Opportunity

The view of a Venus flytrap up close for the first time brings to mind the 1986 flick Little Shop of Horrors. In reality, the little 6-inch tall carnivorous plant is a far cry from the giant man-eating monstrosity featured in the dark musical comedy, but it depends upon one's perspective of course. The motion of an insect inside the trap triggers a closing mechanism that quite literally seals the insect's fate. The motion of the insect's legs on one set of hairs will not cause the trap to close, but contact with another set of hairs within a few seconds will. This redundant triggering mechanism keeps the plant from wasting energy by trapping objects with no nutritional value.
Like plants, small businesses need the proper nourishment to thrive. This is especially true for women-owned enterprises, which are growing at a faster pace than male-owned businesses. Recent Census data indicates that 7.8MM US businesses are owned by women, accounting for 29% of all nonfarm businesses across the country. The growth is such that a new report by the Kauffman Foundation suggests that accelerating female entrepreneurship could have the same positive effect on the economy as the mass entrance of women into the labor force in the 20th century.
Community banks play a vital role in this continued growth. Historically, women business owners have not had the same access to capital as their male counterparts and while tides have shifted somewhat, evidence suggests it's still harder for women to get financing than it is for men. In CA alone, small business loans given to female-owned businesses dropped 70% between 2007 and 2013, according to a study by the California Reinvestment Coalition. Overall SBA lending by all banks in CA dropped 60% during the time period reviewed - from 14,529 loans made in 2007 to 5,982 in 2013. While credit quality and cash flow may have had a role in the difference, loans to women showed a larger drop over that period.
When it comes to obtaining money to run their business, women tend to rely on their own funds more than men do to supplement gaps in financing. Research has shown that women typically use personal savings as their main source of business funding and often don't apply for business credit because they believe they will be turned down.
In response, banks could be more proactive in helping women-owned businesses understand what doors are open to them. It is important to illustrate not only loan offerings specially designed for enterprises like theirs, but other products that can help them be more efficient in managing their businesses like business checking, cash management and card services.
Studies also show that women business owners can benefit from business mentors and are interested in the help. This could offer an opportunity for your bank to help foster connections. One large bank even trained a team to specialize in supporting woman-owned businesses and in delivering financial products.
Most small business customers need some form of hand-holding and nurturing. Women business owners may be more open and interested than men, so take the time to explore their needs. Financial backing and access to mentors are just a few of the nutrients banks can supply to help women-owned businesses grow to their full potential.