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Muhamad Yehia .. Cairo
Euronews looks at some of the reasons stopping female founders from accessing as much money as their male counterparts, as well as what can be done about it.
Female entrepreneurs may face a number of challenges when setting up a business, such as societal and gender stereotypes and biases, a lack of support and role models, and a limited network. However, many also have to jump through more hoops to access financial help, compared to their male counterparts.
That’s according to a recent report by finance broker Swoop Funding, which analysed more than 50,000 UK businesses. It revealed that male-led companies have 12 times more business debt than female-led ones, at £9.5bn (€11.2bn), versus £769m (€904.7m).
This debt can be taken for a number of reasons, including growth or expansion, to cover costs, or if the business is struggling somewhat, although that is rarer.
The average business debt for companies led by men stood at £315,000 (€370,603.8), while female-led companies had £91,000 (€107,034.7) of debt on average
According to the British Business Bank, for every £1 (€1.2) of UK venture capital investment, all-female entrepreneur teams get less than 1p, whereas all-male founder teams are given 89p. Mixed-gender teams get 10p.
At the rates being seen at the moment, all-female founder teams could take over 25 years to make up even 10% of all deals in the UK.
?Why do men have more money access
“The simple answer is that men ask for funding earlier in the process than women do. That’s a simple answer, but there is no simple solution. Funding is the best way to get a business up and running quickly and professionally,” Andrea Reynolds, chief executive officer of Swoop Funding, claimed in an email note
“Many women who start their own businesses are doing so from a ‘kitchen table’ baseline,” she said. “This can often mean they bootstrap their business rather than seek to borrow.”
Knowing what support is out there
A lack of awareness around things such as start-up loans, as well as a lack of targeted marketing from lenders towards female founders has contributed to this trend too.
“Lenders could certainly be doing more to appeal directly to female business owners, particularly around start-up loans, as there is a time limit on when these can be applied for (three years from starting trading),” Reynolds said.
Cultural factors, such as debt often being looked at from an inherently negative lens, have also made it more difficult for female entrepreneurs to see responsible, planned debt as a means to grow faster.
“We are always told that personal debt is something you should enter into with caution, perhaps because we have it ingrained that we should save up to buy the things we want,” Reynolds pointed out
She added: “But business borrowing is different: you’re not borrowing to cover a holiday or a nicer car, you are borrowing to invest in your idea and you should have planned for that investment to bring you a return that makes it worthwhile.”
Stacey-Rebekka Karlsson, founder of PR and marketing company Goho Agency, highlighted how taking out a £25,000 (€29,405) government Bounce Back loan helped to make her company stronger and boosted growth in the long run.
“We came out of the pandemic with a team who could deliver events, amazing PR and banging digital marketing so we could then offer our clients a 360 solution and we’ve managed to grow the business every single year since,” Karlsson said in the Swoop Funding press release.
?How can female founders get more money access
One of the main ways to boost access to business debt is to look for targeted support such as female-focused investment firms and angel investors. In Britain, organisations that have signed up to the UK Investing in Women Code can be a good source of help as well.
Similarly, networking and mentorship groups such as the Female Founders Rise group could unlock funding opportunities and be a source of financial wisdom.
Government grants and business accelerators can be another option. The UK has grants for female-led businesses such as the Prince’s Trust Women Entrepreneurs Programme and the Women in Innovation Awards, among other regional and local grants.
Business accelerators available for UK women founders include the National Women’s Enterprise Week, the Women in Tech Network and the Invest in Women Hub, to name a few.
Using debt wisely
Once you manage to secure funding, knowing how to best leverage it for the long-term success and growth of your business is vital.
One of the most important ways to do this is to establish a strong financial plan and cash flow management strategy through clear budgeting. This means that every expense is accounted for, and a detailed revenue forecasting and cost/benefit is carried out before making any large purchases or investments.
Knowing which business areas to invest in to drive maximum value and growth in the long run is also key, instead of relying indefinitely on external funding and loans. This can help founders to invest in those areas from the beginning and achieve better returns earlier. These returns can then be re-invested into the business or used to pay back loans.
Keeping track of your credit score, which affects how much you can borrow and who will lend to you, is also essential to the long-term health of your business.
