Report Says Women Face Barriers to Capital, Stifling Business Growth

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Arkansas women entrepreneurs, and especially women of color entrepreneurs, face systemic barriers to accessing capital that prevent them from starting and growing businesses, according to a report released Thursday by the Arkansas Asset Funders Network (AAFN).

The report, which includes recommendations for financial institutions and philanthropic organizations, was unveiled during the BankOn Arkansas+ virtual Family Economic Resilience Summit. 

It states that women-owned businesses account for one in four small businesses in Arkansas, and that there are about 80,000 women-owned businesses contributing nearly $10 million to the state’s economy. 

On average, women business owners have a total net worth of $1.1 million, which is about four times higher than the average total net worth of full-time working women at $319,000, according to the report.

The report also said that women of color in Arkansas are denied a loan or line of credit more often than any other group and do not feel as supported by financial institutions as their white peers.

It also states that women of all races are more likely to use credit cards, personal cash or rely on family members for contributions to fund their startups.

Other findings include:

  • Nationally, women receive 2% of all venture capital funding.
  • Nearly 75% of Arkansas’ entrepreneurs of color depend on personal cash to finance their businesses compared to 55% of white entrepreneurs.
  • Of the $1 billion in Small Business Administration financing that went to the state’s small businesses from 2015 to 2019, $12 million (1.2%) supported Black-owned businesses and $18 million (1.8%) supported Latinx-owned businesses.
  • In the last three years, Arkansas business owners of color applied for lending at a disproportionately lower rate than white business owners but were denied lending at a higher rate.
  • 71% of Arkansas business loan applicants were denied a loan for insufficient operating capital, and women business owners of color were most affected by this.

Lack of access to financing is just one challenge women entrepreneurs face. They also have less wealth to start with, encounter occupational segregation and have less access to mentorships as well as other resources, according to the report. 

In addition, while women entrepreneurs are not likely to be charged higher interest rates, they are less likely to receive loans or to receive loans as large as those their male counterparts receive. 

“This is due, in part, to historic gender bias and ongoing embedded biases that continue to have a discriminatory effect and result in lack of trust with traditional financial institutions,” the report reads.

Report recommendations for financial institutions include providing more flexible lending options, increasing access to technical assistance and identifying and changing internal practices that limit access to capital for women and people of color.

The report also encourages philanthropic organizations to be policy advocates and invest in organizations or funds that provide equitable access to capital and mentorship opportunities; support alternative methods of business education and training; and help provide legal help to plaintiffs in anti-discrimination lawsuits.