High on jobs, low on capital; are women entrepreneurs any closer to becoming a major economic force?

Black Enterprise, July, 1995 by Carolyn M. Brown

"Sisters are doing it for themselves" could easily be the theme song for women entrepreneurs. Women own and lead more than 6.5 million firms (30% of all U.S. businesses) and employ over 11 million people, compared with the 12 million employed by Fortune 500 companies.

Despite such gains, women-owned businesses continue to starve for capital. Nearly one-fourth of all women entrepreneurs report difficulty in securing capital from financial institutions. In fact, 70% of women business owners use credit cards and personal resources not only to start but to expand their businesses.

This is one reason why the Office of Women's Business Ownership (part of the Small Business Administration) has been boosting its efforts to improve access to capital among women entrepreneurs.

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OWBO is one of only two government offices that sponsor economic programs for women; the other is the Women's Bureau within the Department of Labor. Betsy Myers, the assistant administrator at OWBO, says that women business owners were receiving only 8% of SBA guaranteed loans during the Bush administration compared with 40% for men. "We sought to raise that number to at least 15% in 1994," she says. Indeed, the loan volume for women increased to $1.17 billion for a total of 7,211 loans, or 20% of all loans.

Last year, OWBO created the Women's Prequalification Pilot Loan Program, which is designed to provide loans of $250,000 or less.

Under the program, women entrepreneurs receive a loan guarantee up front from the SBA. Eligible businesses must be at least 51% women-owned or managed, have average annual sales of under $5 million and employ fewer than 100 people.

The program officially kicked off in Chicago in April of 1994. It has now been expanded to 15 other cities: New Orleans; Philadelphia; Portland; St. Louis; San Francisco; Denver; Boston; Salt Lake City; Helena, Mont.; Albuquerque, N.M.; Augusta, Maine; Buffalo, N.Y.; Charlotte, N.C.; Columbus, Ohio; and Louisville, Ky.

Since last June, roughly $25 million in loans were made to more than 250 women. The top cities for women business owners in the program are Albuquerque, which granted $4 million in loans last year, Augusta, $3 million and Denver, $1 million.

The prequalification program will remain in its pilot stage until officials are sure that it meets its objective of helping women create viable ventures. It's too soon to tell how well minority women business owners have fared, but Paula S. Carlin, director of the Chicago Women's Business Development Center, notes that as of April 1995, no minority women in the Windy City had received prequalification loans.

But OWBO Deputy Director Ellen Thrasher believes the program has "significantly increased women's access to capital, and it definitely meets the demands of a [diverse] group."