The SBA reports that as of the end of last year, there were just over 30mm small businesses in the US, representing about 48% of total employment for the country. By industry, the greatest numbers of employees at small businesses were: health care and social assistance (15%); accommodation and food services (14%); retail trade (9%); manufacturing (9%); and professional, scientific and technical services (9%). Lots of customers for community banks so good luck out there!
Another interesting thing about small businesses is that recent data suggests those owned by women are being established and growing at unprecedented rates. Notably, 40% of new entrepreneurs in the US are now women, according to data from Kauffman. What's more, between 2014 and 2016, the number of women-owned employer firms grew 6%, as noted in a recently released SBA report. That's double the 3% growth rate for employer firms owned by men.
Based on this data, it would be logical to assume that small business loans for women are growing at a similar proportion, but regrettably this is not the case. In-house research from Fundera suggests that only 1 in 4 female entrepreneurs apply for business loans and those who do, seek roughly $35k less than their male counterparts. This provides an opportunity for community banks.
No one is too sure why, but some say one reason could be a lack of knowledge about the availability of certain loan programs tailored to support such women-led businesses.
This is a good time to think about all of this because optimism among small business owners in general is rising and the economy is still strong. So, women business owners specifically may be more inclined to reconsider loans.
The convergence of these factors presents a prime opportunity for community banks to onboard more female business owners as customers. It's also a good opportunity to expand relationships with existing women-owned business customers too.
To start, make all small business owners aware of viable options such as SBA loans, lines of credit and microloans. Here for example, one mega bank publicly pledged $100mm to help female-led businesses specifically gain access to necessary capital. Generating this type of buzz is not only good publicity for the bank as a whole, but more specifically it signals to entrepreneurs that their success is important to your bank.
To win more business, seek to foster practices that prove effective with business owners. For example, have some products for the risk-adverse in the crowd and others for those who may want to grow faster. Still other ways can be to explore business mentorship; educate customers how to improve their credit scores and things like that.
Just as the opportunities for women-led businesses are increasing, so too are the prospects for community banks to help all small business owners. We know you are tight with your customers, so we hope some of these tips above help focus your efforts as you continue on a solid footing for years to come.