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Finally, Credit Where Credit Is Due

BusinessWeek Investor: Hers

Finally, Credit Where Credit Is Due

After years of ignoring women business owners, banks and other lenders are beckoning

Marlene Waldock had no idea that getting a small-business bank loan would be so "simple and painless." But that's what she discovered last month when it took Fleet Bank just under an hour to approve her $20,000 loan. Waldock, like most other women entrepreneurs, had avoided applying for bank loans. "I thought the process was too long and difficult," she says. For the past 13 years, she depended instead on her credit cards to finance 1st Impression Communications, her Roseland (N.J.) marketing and communications company. "But this time," says Waldock, "I needed flexibility to grow my business that I couldn't get with credit cards."

For the successful woman business owner, the time couldn't be better to tap bank or nonbank financial institutions. "Lenders have woken up and are beating down the doors of women entrepreneurs," says Whitney Johns Martin, president of the National Association of Women Business Owners (NAWBO) and CEO of Capital Across America, a Nashville investment group that lends to and invests in women-led companies.

What's the appeal? Women are starting businesses at nearly twice the rate of men. As of last year, 9.1 million women-owned businesses employed 27.5 million people and generated more than $3.6 trillion in revenues, according to the National Foundation of Women Business Owners (NFWBO). So financial institutions understand "that women-owned businesses are a powerful economic base," says Glenn Yago, director of capital studies at Milken Institute, an economic think tank in Santa Monica, Calif., and author of a forthcoming study on the availability of credit to women.

Several lenders have rolled out programs tailored to women-owned businesses. Wells Fargo, a pioneer in the market, in 1995 earmarked $10 billion over 10 years--and it has been lending at a rate of about $1.5 billion a year. In recent months, First Union set aside $5 billion, and Fleet $2 billion, to lend to this group.

But loans are only part of the effort. The banks "are asking what else they can do to support growth and success of these companies," says Sharon Hadary, executive director of NFWBO. Fleet, for instance, set up Women Entrepreneurs' Connection, which helps devise business plans and provides other resources as well as networking opportunities. Merrill Lynch, American Express, and some other organizations courting women have no formal programs but refer them to such sources of expertise and funding as the Small Business Administration's Office of Women's Business Ownership.LOYAL CUSTOMERS. It wasn't always this way. Women entrepreneurs, even those who may have qualified for debt financing, typically tapped personal assets, friends, family, and credit cards before they ever walked into a bank. Why? "Banks weren't taking women businesses very seriously," says Teri Cavanagh, director of Fleet's Women Entrepreneurs' Connection. Now financial institutions are taking note of the unique characteristics and needs of women business owners. "Women are as good, if not better, credit risks than their male counterparts," says NAWBO's Martin. And these entrepreneurs, according to Fleet's Cavanagh, are very loyal, relationship-minded customers. She notes that women also want a lot of financing information but, as a 1999 American Express Small Business Services study points out, they're less likely to know where to find it. That's the gap that banks such as Fleet are trying to fill.

Note that while it's nice to be in demand, the loan process is the same regardless of gender. Entrepreneurs, whether men or women, still must meet rigorous credit qualifications to get a loan. But what women entrepreneurs are starting to get is a sign that says "Open for Business."For more on women and investing, or to join a discussion in our forum, see at Comments? E-mail or fax (212) 512-2538By Toddi GutnerReturn to top

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