Why Do Women Entrepreneurs Get Denied Loans?

Recently, the American Bankers Association (ABA) met with the Consumer Financial Protection Bureau (CFPB) to discuss Dodd-Frank Act Section 1071, which requires financial institutions to report women-owned, minority-owned and small business lending data.

According to the ABA Banking Journal, among topics of discussion were “the costs and burdens of collecting small business lending data, as well as the potential for misinterpretations or incorrect conclusions that may arise from the collection or public release of such data.” Participants also voiced concerns regarding financial institution confidentiality and customer privacy related to public data releases.

Lending Gap

Findings reveal that when women seek business loans, they are approved less, ask for lower amounts, and receive higher loan rates than men. A 2016 study by Fundera surveying 8,423 small businesses found:

  • Women had a 32 percent approval rate, compared to 35 percent for men
  • On average, women requested $89,000 in debt financing, compared to $124,500 for men

In a recent article for CNBC, Rohit Arora, CEO and Co-founder, Biz2Credit.com, affirms, “Last year the average funded business loan for women-owned firms was $99,000. In comparison, the average size of a business loan for male entrepreneurs was $105,172. However, men-owned businesses had about a 25 percent better chance of their loan being approved.”

Although this collection of information may represent significant costs and burdens to financial institutions, it is imperative that it take place. The value of lending information regarding women-owned, minority-owned and small businesses is tremendous in that it allows the industry to identify the reasons behind lending decisions and begin to generate effective solutions to lending imbalances.

The CFPB is currently accepting public comments until September 14 to their Request for Information Regarding the Small Business Lending Market.

To provide comments and make your voice heard on behalf of women-owned, minority-owned and small businesses, please visit the Federal Register.


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