Credit Scores and Revenue of Women-Owned Businesses Rose, But Revenue Gap Grew in 2019, According to Biz2Credit's Annual Study
03/10/2020 | 08:35am EDT
NEW YORK, March 10, 2020 (GLOBE NEWSWIRE) -- The average annual revenues of women-owned business rose 68% in 2019 to $384,359 from $228,578 in 2018, according to the annual study of women-owned companies by Biz2Credit, a leading online credit marketplace.
However, businesses owned by men in 2019 generated an average annual revenue of $752,154 in 2019, a nearly 60% jump from $473,157 in 2018. The research found that male-owned firms made $367,795 morerevenue on average than women-owned businesses last year, according to Biz2Credit research.
The study included 30,000 companies nationwide in over 20 industries, including retail, healthcare, hospitality, construction and professional services, among others.
"Women business owners overall did well in 2019 and contributed significantly to the strong U.S. economy,” said Biz2Credit CEO Rohit Arora, who oversaw the research. “Their revenues and credit scores were up, and their average age of business is longer than before.”
Additionally, the credit scores of women-owned companies still lagged behind the success those male-owned firms in 2019. Biz2Credit found that while the average credit score for women-owned businesses increased from 588 in 2018 to 590 in 2019, they trailed scores of the scores of their male counterparts (613) by 23 points.
“There’s no doubt that women-owned companies are performing better than they have at any other time in history. However, the factors that have helped buoy firms owned by women are also bolstering firms owned by men," added Arora, whose firm has arranged more than $2 billion in small business financing since 2007. “Interest rates are low, the stock market is strong, business optimism is high, and consumers are spending.”
“It’s encouraging that the percentage increase in revenue for women-owned businesses outpaced male counterparts. However, to be at parity, these businesses would need to almost double their revenue – a challenging feat even in the best economic times,” said Adrienne Garland of She Leads Media, an expert on women’s entrepreneurship. “I remain eternally optimistic that women entrepreneurs will continue to deliver strong revenue growth, and expertly manage expenses to produce be efficient and profitable companies."
The number of women-owned businesses that applied for funding in 2019 increased slightly, although their average loan amounts went down from $48,341 to $40,513 in 2019. The most common type of funding was working capital loans.
According to Biz2Credit figures, the top ten states in 2019 for applications from women-owned businesses were Texas (last year’s No.2 spot), California, which was knocked out of the top spot, Georgia, New York, North Carolina, Ohio, Pennsylvania, Michigan, Illinois, and Tennessee. Entrepreneurship is booming in Texas, particularly in and around Austin, and in other tech centers.”
Nearly one quarter of loan applications came from women-owned businesses in the Services category, which includes translation and public relations services, hair and nail salons, and cleaning companies. Next came Retail (18.4%), Food & Hospitality (12.6%), Health Care and Social Assistance (7.0%), Arts & Entertainment (5.7%), and Construction (5.6%).
“The strong economy is like a high tide that raises all the boats,” Arora said. “When businesses owners are doing well, they can invest in their companies. With strong financials and an overall atmosphere of optimism, borrowers have confidence in expanding their enterprises.”
“Meanwhile, lenders are willing to make small business loans. Advanced financial analytics has dramatically reduced default rates for banks and other lenders, and those that make SBA loans have their risk mitigated by the government guarantees,” Arora added. “This makes it very attractive to provide capital to small businesses.”
Big banks approved 28.3% of the loan applications they received in January 2020, a post-Great Recession record, according to the most recent Biz2Credit Small Business Lending Index released on February 11. Small banks, which process a lot of SBA loans are granting more than half of their funding requests.
Like other women business owners, Anna Dicenso of Rino's Restaurant, a Boston-based eatery featuring southern Italian cuisine that has been featured on Food Network’s Diners, Drive-ins and Dives, was surprised at how quickly she was able to secure working capital for the down period that comes annually during the winter months.
“After the New Year, business lags a little bit. Sometimes, we see a 30% decrease in our numbers,” said Dicenso, who received funding in less than a week after applying for it through Biz2Credit. “We did a $30,000 small business loan and during a recent break hired a painter come in and do some touch ups to give the place a fresher look. The loan provides us with a cushion for leaner times.”
Established companies, naturally, have an easier time securing capital than startups, and women entrepreneurs seem to face greater skepticism from traditional lenders.
“In the first few years, the hardest part was getting people to validate and believe in me,” said Tammy Johnson, who owns High Spirits Hospitality, an upscale “beverage catering” business based in Greensville, South Carolina. “They didn’t know what to think of a 26-year-old girl who was coming to buy a lot of beer and liquor for a bartending company. Now, for some distributors, I’m the biggest customer in the state.”
Having a growing company and good local bank relationships wasn’t enough to secure funding for a woman-owned bartending business, however.
“I didn’t have a home in my name or diverse credit. The only thing on my credit report were business cards. The banks only cared about personal credit, not whether my company was successful. That can make it tough,” Johnson said.
Percentage of Applications from women-owned businesses in 2019 was 29.1%, compared to 28.8% of the applicants in 2018.
Average Annual Revenues of women-owned business rose to $384,359 in 2019, a 68% increase in revenues over $228,578 in 2018.
Average Credit Score for women increased by points from 590 in 2017 from 588 in 2018.
States with greatest number of loan applications from women-owned businesses were Texas, which pushed California to No. 2, followed by Georgia, New York, and North Carolina.
Industry Sectors: Services (except Public Administration), followed by Retail, Food & Hospitality, Health Care and Social Assistance, Arts & Entertainment, and Construction.
Comparing: Women-owned vs. Male-owned Businesses
Women-to Men Borrowing Ratio: 29.1% vs 70.9% registrations on Biz2Credit.com in 2019.
Average Annual Revenue Gap women-owned businesses ($384,359) earned $367,795 less on average than male-owned firms ($752,154) in 2019.
Average Credit Score: On an average the credit score for women-owned businesses (590) were 23 points lower than male-owned Businesses (613) in 2018.
Average Loan Size for women-owned businesses ($40,513) was 72% less than the average loan size for businesses owned by me ($69,596) in 2019.
Average Operating Expenses for women-owned businesses were slightly higher for women (72% of revenues) than for men (67% of revenues) in 2019.
Average Age of Business for women-owned businesses (48 months) was lower than the age of business for male-owned companies (57 months) in 2019.
About Biz2Credit Founded in 2007, Biz2Credit has provided more than $3 billion in small business loans and financing. The company is expanding its industry leading Biz2X™ digital platform for banks, financial institutions and other service providers. Visit www.biz2credit.com or Twitter @Biz2Credit, Facebook, and LinkedIn.