This year marks the 30th anniversary of the Women’s Business Ownership Act, the legislation that allowed women to sign their own loan documents without a male relative co-signing.
The law was a major breakthrough — a symbol of women’s independence from economic patriarchy. It promised more success for women entrepreneurs.
For example, in 1987, Essie, an unmarried woman in her early 30s and owner of a successful corporate training business, was turned down by 13 banks as she sought growth capital to meet demand for her services. She was forced to “play bank” and took loans from friends and colleagues at 25% interest. It took enormous persistence and bookkeeping, but she pulled it off, operating for another 28 years, creating many jobs and becoming a local business leader.
The good news is that, 30 years later, there are now 11.7 million women-owned businesses across the country, accounting for nearly a third of all businesses. In 2016, these women-owned businesses created 9 million jobs and earned $1.7 trillion in sales.
Now for the bad news: Women-owned businesses get only 4% of commercial loans and only 18% of loans guaranteed by the Small Business Administration. We know that women need coaching and small amounts of capital in order to grow, but the source of this support, the SBA’s Office of Women Owned Business, gets just $17 million in funding per year, even though the office’s women’s business centers served 145,000 women last year.
Women entrepreneurs are the sleeping goddesses of our economy. When a woman business owner is successful, she buys a house and invests in her kids’ education. At the same time, her purchases, donations and taxes circulate locally.
The Office of the Comptroller of the Currency will soon issue draft revisions to the Community Reinvestment Act. CRA reform should include policies that provide double CRA credits to banks that invest in women business centers — both through loans and grants — and that also increase their percentage of SBA loans to women to reflect their presence in the economy. We also urge Congress to increase the budget for the SBA’s Office of Women’s Business Ownership by another $20 million. These increases in support for women entrepreneurs could increase GDP by 1-2% alone and create thousands of new jobs.
Banks also need to increasingly target women businesses, from small loans to lines of credit. They can work directly with their local Women's Business Center to help qualify and obtain referrals of loan-ready borrowers. They can target their marketing to women for home mortgages. They can create targeted investments for women businesses through nonprofit CDFIs. Moreover, CDFIs can refer their women borrowers who now need more capital to banks. Business assistance, pro-active investing and coordinated referrals can move more capital into the willing and capable hands of millions of women entrepreneurs.
By supporting women entrepreneurs directly and through government programs, banks can play a key role in creating jobs and growing the economy.