Research in 2012 found that 51 percent of women who had started their own business needed an injection of capital to fund growth. No surprise, perhaps, when 41 percent of women surveyed had started their business with less than $5000. Accessing capital is not always easy when you’re a small business owner, and it seems it’s even harder for women to access capital. A number of reasons for this have been suggested, including:
- Women tend to start with less capital making it harder to leverage additional funds.
- Women don’t ask for the right amount of capital – we underestimate our growth potential and have a low risk tolerance.
- There may be a perception of women as less capable than men as business owners, by some lenders.
- On average, women don’t own as many mortgageable assets as men making them less attractive to banks.
On that last point, it’s not just female small business owners who find it difficult to access capital from banks. At the National Reform Summit, a number of business groups pointed to the big banks’ requirement for borrowers to put up their homes or other personal assets as collateral or instead issuing high interest rate credit cards as a loan alternative, as a barrier to business growth. So what are the options? Last week, the Minister for Small Business, Bruce Billson, endorsed the new “fintech” online lenders model as the disruptive force needed in small business lending. Spotcap is the latest to enter the online market in Australia following PayPal, Prospa, OnDeck, Kikka, Moula and ThinCats.
** These businesses are 100 percent online and offer unsecured lines of credit to applicants who meet minimum requirements. This is an attractive option for people who do not own property or other mortgageable assets.
Minister Billson is hopeful the fintech entrants will shake up lending practices at the big banks too, to encourage competition that benefits the small business sector. Crowdfunding is also growing in popularity as a way to fund small businesses, particularly startups. It’s a popular method for entrepreneurs with a prototype product seeking customers to fund and guarantee production. But its popularity has caught the eye of the Australian Taxation Office which has recently issued new guidelines that state crowdfunding revenues should be declared as income. This concerns some in the entrepreneurial community who say startups may be taxed upfront leaving some of them unable to fund production or fulfill orders. The government is also exploring a legislative framework for crowdsourced equity funding and is expected to introduce legislation to parliament during the spring session this year.
**HerBusiness does not endorse or recommend private lenders. Individuals should do their own due diligence and risk assessment before applying for a loan.
