As Revenue of Women-Owned Businesses Rose, Credit Scores and Loan Amounts Dropped in 2018; According to Biz2Credit Study
03/07/2019 | 09:21am EDT
NEW YORK, March 07, 2019 (GLOBE NEWSWIRE) -- The number of women-owned businesses that applied for funding in 2018 increased by 13 percent, although their funding amounts went down, according to an annual study of women-owned companies by Biz2Credit, a leading online credit marketplace.
The study, which included 30,000 companies nationwide in over 20 industries -- including retail, healthcare, hospitality, construction and professional services, among others -- revealed that the average loan amount for women-owned companies was $48,341 last year. The most common type of funding was working capital for business expansion.
Additionally, the study found that while average annual revenues increased, credit scores for women business owners and the average age of women-owned companies applying for small business loans dipped.
"Small business owners were willing to take more risks in 2018 because the economy was very strong,” said Biz2Credit CEO Rohit Arora, who oversaw the research. “Women business owners who might have previously held off from borrowing money for expansion or capital improvements, increased last year. Record high optimism and the strong economic tailwinds of 2018 supported the growth of small businesses.”
Biz2Credit found that the Average credit scores for women-owned businesses dropped from 598 in 2017 to 588 in 2018 and trailed the scores of their male counterparts (613) by 25 points.
“When we take a macro look, women are increasingly becoming entrepreneurial and are applying for loans at earlier stages of their companies’ life cycles," added Arora, whose firm has arranged more than $2 billion in financing for small business owners in the past decade. “Their credit scores often are lower because of both the wage gap and the higher amounts of student loans that they are paying off.”
“There are some very practical actions that women can take to improve credit scores such as ensuring they are making payments on time, keeping credit utilization to 30 percent or less, and limiting the number of credit inquires, to name a few,” Adrienne Garland of She Leads Media, an expert on women’s entrepreneurship, says. “With improved credit scores, women can seek larger amounts of financing, and use that as leverage to propel their businesses to even greater levels of growth and profitability to accomplish their goals and pursue their dreams.”
At the same time, average annual revenues of women-owned business rose from $202,491 in 2017 to $228,578 in 2018, according to Biz2Credit, which analyzed 30,000 applications from business owners through its online platform last year.
Meanwhile, businesses owned by men in 2018 generated about 7 percent more revenue ($473,157) than they did in 2017 ($444,227), and made $244,579 more revenue on average than women-owned businesses last year.
“The economy in 2018 was among the strongest on record. Optimism among small business owners was the highest ever recorded and, increasingly, business owners were willing to take risks. Businesses owned by women continue to grow,” Arora added.
The Biz2Credit research found that the average funded amount for women-owned businesses ($48,341) was 31% less than the same for Men-owned businesses ($70,239) in 2018.
“Funded amounts were lower for both men and women in 2018. This can be attributed, in part, to the high number of SBA loans granted this year. Increasingly, because of the government guarantees that come with SBA loans, banks were willing to lend money to businesses than might not otherwise qualify for traditional bank term loans,” Arora explained. “Additionally, younger businesses might be more conservative in asking for money and seem to be more carefully managing their growth.”
According to Biz2Credit figures, the top five states for applications from women-owned businesses were California (13%), Texas (11%), New York (6%), Georgia (6%), and Ohio (5%). We have seen the most funding requests coming from technology centers like California, Texas, and New York.
“We have seen the most funding requests coming from technology centers like Silicon Valley, Austin, Texas, and New York City, areas where the real estate markets are also booming,” Arora explained.
Nearly one-in-five loan applications from women-owned businesses were in services (except public administration), which include translation and public relations services, as well as hair salons, nail salons, and cleaning firms, at 19.7%, followed by retail (18.2%). Other industries for which there were the highest percentage of loan applications were: accommodation and food services (14.3%), healthcare and social assistance (7.6%), and construction (6.4%).
Even though women-owned businesses are growing, they still face challenges, especially when the company is in a male-dominated industry. For instance, Maryam Zadeh, owner of the trendy HIIT BOX gym in Brooklyn, NY, had strong personal credit scores and a growing customer base, yet still found it challenging to secure funding.
“We’re a pioneer in Brooklyn with a boutique fitness gym. I can get press and have a level of notoriety, but often lenders will ask me where my ‘male partner’ is,” said Zadeh, who has twice moved into larger spaces because of the growing customer base for her high intensity interval training. “Like any other business, we need growth capital.”
She recently secured a bridge loan that enabled her to secure a larger space in the Gowanus section of Brooklyn, a once gritty area that is booming. Zadeh says the solid offering of her business, her growth rate, and the positive publicity she has received were helpful in securing funding.
“We are adding to our customer base, but with that growth comes increased costs, including front desk help, salaries and other costs,” Zadeh says. “There is always something to spend money on during a growth phase.”
Volume of Applications from women-owned businesses were 28.8% of the applicants in 2018.
Average Annual Revenues of women-owned business rose to $228,578 in 2018, an improvement of 13% over 2017.
Average Credit Score for women dropped ten points from 598 in 2017 to 588 in 2018.
States where the greatest number of loan applications from women-owned businesses originated were: California, Texas, New York, Georgia, and Ohio.
Industry Sectors: Services (except Public Administration) represented almost one-in-five (19.7%) women-owned companies in the study. Other top industries included Retail, Accommodation and Food Services, Health Care and Social Assistance, and Construction.
Comparing: Women-owned vs. Male-owned Businesses
Women-to Men Borrowing Ratio: 28.3% vs 71.7% registrations on Biz2Credit.com in 2018.
Average Annual Revenue Gap women-owned businesses ($228,578) earned $244,579 less on average than male-owned firms ($473,157) in 2018.
Average Credit Score: On an average the credit score for women-owned businesses (588) were 25 points lower than male-owned Businesses (613) in 2018.
Average Loan Size for women-owned businesses ($48,341) was 31% less than the same for Men-owned businesses ($70,239) in 2018.
Average Operating Expenses for women-owned Businesses (51%) less as compared to their male counterparts in 2018.
Average Age of Business (in months): 43 vs 52 for male-owned companies (the average age of business in months was lower for women-owned companies in 2018).
About Biz2Credit Founded in 2007, Biz2Credit has arranged more than $2 billion in small business financing and has several times been named to Crain’s New York’s Fast 50 and was recently ranked among the top 200 fast-growing companies on Deloitte's 2018 Technology Fast 500. Biz2Credit is expanding its industry-leading technology in custom digital platform solutions for leading banks and other financial institutions, investors and service providers in the U.S. Visit www.biz2credit.com or follow Biz2Credit on Twitter: @Biz2Credit, Facebook, and LinkedIn.