Access
to Capital for Women and Minority Owned Businesses
Testimony before the Committee on
Small Business, U.S. House of Representatives,
Roundtable
on Access to Private Capital, March 1, 2002
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I am pleased
to participate in this roundtable on behalf of Women Impacting Public
Policy (WIPP) -- a national
bi-partisan public policy organization that advocates for and on behalf
of 250,000 women and minorities in business strengthening their sphere
of influence in the legislative process of our nation, creating
economic opportunities and building bridges and alliances to other
small business organizations.
Access to capital has been, and remains, a critical issue for emerging
and growing businesses, particularly those owned by women and
minorities. I come from the 11th largest state in the country – a state
which ranks 33rd in the nation in the rate of growth of women owned
business and in the top ten of all states in the number of minority
women owned businesses.
A study of barriers to women owned businesses conducted by the Virginia
General Assembly in 1995 found that (of the women business owners
surveyed) 56% felt that women business owners had difficulty accessing
short term capital all of the time, 37% agreed that this was true all
of the time, and only 7% responded that this was not a problem. One
third of the survey respondents indicated that gender bias by bank
officers was one of the main barriers to obtaining financing. The
survey found that 49% of women business owners relied on personal
savings to finance their businesses, 37% relied on business earnings
and 36% relied on credit cards to adjust to the lack of access to
capital from outside sources.
While I think that we can all agree that the situation has improved
since 1995, women businesses still face greater obstacles in obtaining
financing for their businesses than similarly situated men.
A recent national study funded by Wells Fargo and conducted by the
Center for Women’s Business Research confirmed that use of credit cards
by women business owners dropped nationally from 52% to 36% from
1992-1998, and their use of business earnings to finance growth doubled
to 65%. At the same time, however, only 52% of women business owners
(compared to 59% of men business owners) had access to bank credit.
And, in fast-growth firms only 39% of women owners had bank loans
compared to 52% of men owners. This suggests that the drop in reliance
on credit cards by women owners during this period may have had more to
do with the strong business climate and higher earnings than it did on
greater access to capital. It will be interesting to see whether and
how these data change as growth slows and the effects of the recession
are factored in.
The picture painted in this same national study was less favorable for
minority women business owners – 60% of Caucasian women had bank
credit, compared with 50% of Hispanic, 45% of Asian, 42% of Native
American and 38% of African American women owners.
And, although women are becoming more active in the equity capital
markets, a 1999 survey showed just 9% of the institutional investment
deals and 2.3% of the dollars among the investors interviewed went to
women-owned firms.
There are some simple things that the women business owners represented
among the WIPP membership think Congress and the federal government can
and should do to help improve this picture. They are:
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Speed
up the application process for Small Business Investment Companies
(SBICs) that focus on investing in women owned businesses; |
• |
Provide
funding to increase awareness among women business owners of Federal
resources through better and more targeted marketing of SBA programs
and better dissemination of information on hub zones; |
• |
Provide
funding for additional training on access to capital for women and
minority business owners; and |
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Close
the gap in the Microloan program by increasing the maximum loan amount
to $50,000. |
This committee might also want to consider finding a way to recognize
and reward publicly banks, venture funds and other investors whose
records show they make lending and other investment decisions fairly
and without bias based on the race, ethnicity or gender of the business
owner.
Thank you.
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