Leveling the Playing Field

Capital Acquisition for Women-Owned Firms

One of the first lessons of business is that you need cash to grow. A disproportionate number of women-owned firms are financing growth with company profits-a strategy that can be painfully slow or simply unrealistic.

Access to sources of capital such as equity, lines of credit, and short- and long-term loans can speed growth and boost a company's bottom line-regardless of who owns the company.

Though the use of outside capital by women business owners is growing, more than half of the women responding to a 2002 survey by the National Women's Business Council said that they found it difficult to secure the capital necessary to start their own businesses. Only about half of the women who own fast-growing firms use commercial credit compared with 75% of their male counterparts, according to the Center for Women's Business Research (CWBR). And the U.S. Small Business Administration reports that the percentage of SBA-backed loans to women has remained unchanged since 2000.

For women business owners seeking private equity, the disparities are even more glaring. Just 5% of 2004 venture capital deals involved women-owned firms, according to the Diana Project, a human rights organization at Yale University.

This lack of access to outside capital is especially troubling given the increase in the number of women-owned firms. According to CWBR, the number of women-owned businesses grew by 23% between 1997 and 2004 compared with 9% growth for all businesses during the same period.

The financial community, government agencies, and private investors should be doing more to ensure that women business owners have access to capital, but there are also a number of strategies that women business owners can employ to help themselves.

Develop a well-written, comprehensive financial management plan outlining the assets, debts, and the current and future potential profit of the business.
Secure the right resources to prepare a plan and to introduce it to the right investors.
Have the resources available to sustain the business for four months in order to prove financial stability.
Conduct a regular analysis of business resources to ensure efficiency and to demonstrate resource management.
Maximize the income potential and monitor the results.
Encourage congressional support of the SBA loan program.
Seek equity-based capital programs such as the Small Business Investment Companies Program.
Promote government policies that foster growth and expand high-growth small businesses.

Although there is no one-size-fits-all approach for obtaining outside capital, the strategies listed here can help women business owners secure capital to expand their businesses-just as fast as they start new ones.

Gayle Watson is the president of the National Association of Women Business Owners, the only dues-based national organization representing the interests of all women entrepreneurs across all industries. Log on to http://www.nawbo.org/ for additional information.

Originally published March 2006. Reprinted by permission, uschamber.com, March 2006.
Copyright 2006, U.S. Chamber of Commerce.