There are an estimated 11.6 million women-owned businesses in America employing nearly 9 million people and generating more than $1.7 trillion in revenue, according to the 2017 State of Women-Owned Businesses Report commissioned by American Express.
Women-owned firms still struggle with access to capital, but there is evidence they are having more success than men using new and alternative funding vehicles such as crowdsourcing.
More on the alternatives below but first a sad and familiar story: Raising money remains as one of the greatest barriers for women trying to launch, scale, and grow their businesses. According to the National Women’s Business Council (NWBC) report, Understanding The Landscape: Access to Capital for Women Entrepreneurs:
- Women raise smaller amounts of capital and rely on personal sources of income more than men.
- Female entrepreneurs are seen as “less credible” and “less legitimate.”
- Female investors still prefer to work with male business owners.
- Women’s networks have fewer viable economic resources compared with men’s.
The good news is alternative funding options are helping some women entrepreneurs more than traditional banks—and many women are willing to try creative substitutes. The NWBC report notes that women are more willing to connect with their networks to raise capital through crowdfunding and tend to have better success at it than men.
The Wisdom of Crowds
While more men overall use crowdfunding, research shows that women were more successful in this growing funding arena. That could stem from a women’s unique social network makeup as women have been found to have larger and closer social networks to help influence potential investors. Notable results from both the Amex and NWBC research reports include the following:
- The first 30 days matter the most on Kickstarter, as the likelihood of success decreases substantially as a fundraising campaign gets closer to its end, and especially after the first 30 days.
- Setting a realistic goal is essential and the funding goal should take into account a borrowers’ network size. On Kiva, for women with a smaller online network, greater success might be achieved by setting a goal less than $6,000.
- Your personal stories are powerful tools for reaching your funding goals, on Kiva, longer personal stories were associated with higher likelihood of success compared to other textual pitch categories.
- Network size matters, but how it is leveraged is more important as both the number of Facebook shares and number of Facebook followers are predictors of success on Kickstarter. But the number of Facebook shares has a notably larger effect on success rates.
Kickstarter: Male vs. Female Success Rate
The NWBC found that on average, women entrepreneurs on Kickstarter were on average 9% more successful than men. In fact, female entrepreneurs have a greater success rate across nearly every category. Women also accounted for 31% of all entrepreneurs participating in the Kickstarter platform.
The Small Business Act
Some additional funding options for small business owners include the Small Business Administration’s (SBA) loan guaranty program. One of two loan guaranty programs designed to help small business owners, the program approved $24.1 billion in funding in 2016.
But the SBA says access to small business loans is declining, so more women entrepreneurs are turning to online banks to grow their businesses. Online bank loans have become a popular option but interest rates on sites like OnDeck can be anywhere from 9% for established businesses to 99% if your credit is average or poor or if your business is less than a year old.
Other options for funding include:
- Community Development Financial Institutions or CDFIs, which are backed by the U.S. Treasury Department and play a role similar to banks. A CDFI promotes access to investment capital for underserved communities and the leaders who grow community businesses.
- Women can turn to specific funds that promote women or minority-owned businesses. The National Women’s Business Council lists growth and funding alternatives on their website with the specific purpose of encouraging more women-led businesses and expansion.
- Mentorship and other women role models are a powerful way to encourage leaders to start or grow their businesses. The Small Business Association reports that small business owners who have access to mentoring report higher growth rates and revenues. Often an entrepreneur simply needs to hear something positive from someone who’s been there.
- Other funding options include e-commerce platform Shopify, which allows loans based on sales volume, or even PayPal.
This story originally appeared on Experian.com. Matt Tatham is the manager of content insights and data analyst at Experian Consumer Services, a division of Experian, the nation’s largest credit bureau.