Increasing Access to Capital for Women-Owned Small Businesses

It is a significant milestone for women-owned small businesses in the United States, as 1 in 5 small business loans (21%) backed by the U.S. Small Business Administration (SBA) now go to women owners. This marks significant progress from the 1980s, when women were still unable to obtain business loans on their own.

The total SBA loan volume to female entrepreneurs has surpassed $5 billion in fiscal 2023, showing a remarkable 69% increase from approximately $3 billion in 2020. This increase in funding has been made possible by the efforts of the Biden administration in promoting equitable economic growth.

The Persistence of the Gender Gap

Prior to the changes in legislation in 1988, women seeking business capital faced insurmountable challenges in accessing it. However, despite the progress made, a persistent gender gap in access to capital remains evident across various sectors, from investor equity to traditional bank loans.

Recent data highlights the stark disparity, with women-founded companies receiving less than 3% of total capital invested in venture-backed startups in the U.S. On a global scale, women-owned small and medium-sized enterprises face a gender credit gap estimated at $1.5 trillion, according to Goldman Sachs.

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Record Levels of Support

The latest data from the SBA’s fiscal year 2023 is particularly noteworthy. Loans to women-owned small businesses exceeded the $5 billion mark, constituting 1 in 5 loans (21.3%) provided to small businesses. This record-breaking achievement aligns with the Census Bureau’s findings, which report that 21.4% of employer-owned businesses in the U.S. are owned by women.

While the $5 billion loan volume in fiscal 2023 is not the peak, as loan volume reached $5.7 billion in 2021, the Biden administration highlights this data as part of its “Bidenomics” push for equitable economic growth leading up to the next election.

Ensuring Continued Progress

Recognizing the important role women-owned small businesses play in powering the nation’s economy, SBA Administrator Isabel Guzman emphasized the commitment of the Biden-Harris administration to providing women with the necessary capital and resources to build resilient businesses and create jobs. This commitment is vital in fostering a business environment that empowers women entrepreneurs and promotes inclusive economic growth.

During fiscal year 2023, the SBA provided over 13,059 loans to women-owned small businesses, a significant increase from 7,715 loans in 2020. The total loan amount of $5.18 billion in 2023 reflects a 61% surge compared to $3.2 billion in the previous year.

The Impact of Women-Owned Businesses

While it is challenging to track the real-time influence of women entrepreneurs on the economy, Census data reveals that women-owned businesses generate an estimated $1.9 trillion in receipts, employ 10.9 million individuals, and contribute to an annual payroll of $432.1 billion. These numbers demonstrate the substantial economic contributions made by women-owned businesses.

Navigating the Credit Environment

The SBA loan numbers are particularly remarkable considering the challenging credit environment. The Federal Reserve’s decision to raise interest rates by over 5% in a year has resulted in small business loan rates reaching double-digit percentages. A survey conducted by Goldman Sachs revealed that 78% of small business owners are concerned about access to capital, with more than half (53%) stating that they cannot afford a loan at current rates.

The SBA’s loan programs, such as the 7(a) and 504 loans, provide guarantees and long-term financing options for small businesses, aiming to alleviate the financial challenges faced by entrepreneurs.