How Women Business Owners Are Held Back

For three days last month, Teri Cavanagh brainstormed with financial services professionals about women's entrepreneurship around the world and how to drive economic growth. Cavanagh, executive director of the Global Banking Alliance for Women, is a former entrepreneur and banker who does peer mentoring for female entrepreneurs near her home on Cape Cod in Massachusetts.She spoke recently with Smart Answers columnist Karen E. Klein about the state of women business owners today and how to help them move forward. Edited excerpts of their conversation follow.

Karen E. Klein: You recently brought 150 attendees to Washington for the 10th annual summit of the Global Banking Alliance for Women. What is the group's goal?

Teri Cavanagh: The alliance is a consortium of financial services organizations from developed and developing nations. We collaborate to accelerate women's business growth and wealth creation worldwide. Data shows that women business owners employ more women than male-owned firms and they hire more women professionals, who will be able to command higher salaries.

In the 1990s, you worked for U.S. banks focused on doing more business with women entrepreneurs. You also worked on gender initiatives and on increasing access to capital for women worldwide. What's changed since then?

In the late '90s there was a wave that kept building: An association of strategic partners like the Small Business Administration, the Women's Business Centers, and [businesses from] Corporate America were looking at the women's business market. The feeling was that women's business organizations could all leverage each other's work and that support groups were really the right construct to allow women to be even more successful on their own.

But these days, with so many mergers, the larger banks cut a very wide swath in the market and those corporate programs either disappear or become diminished. It's very difficult for a large bank to execute deliverables in every market. And it's even harder now because the focus has gone off customers. The banks that have survived have such large market share—there's no incentive to look at women's markets.

Between that reality and the recession, what's happened to progress for women in business over the past decade?

The progress has sort of stood still. And meanwhile we've found that there are other things going on. For instance, some women choose to keep their business small because it fits their lifestyle, due to the family caretaking issues that fall to women.

What about banking issues and access to capital for women?

In terms of working with banks, we find that women want relationships, they don't just want transactions.

Also, speaking very generally here, men seem to understand leverage more than women. In a study that tracked high-growth companies—gazelles—52 percent of the male-owned firms had bank debt funding their growth, while only 29 percent of women had it.

So women are not getting to the money soon enough. They're credit-worthy, but they're very conservative in their projections and their tendency to see debt as an obstacle really impedes their growth.

How are they seeing debt as an obstacle?

Men understand that using other people's money can propel their growth. That's basic financial literacy. Whereas many women will say: "I thought it was good for me not to incur debt." They think that if they're showing a profit and funding the business through operations, that means they're doing well. They're not thinking about increasing their customer base or opening a second store—those things that require you to get to the bank and get loans or investors or angel capital.

What else restrains women's business growth?

Men have traditionally had mentors. Women business owners network and join associations and try to collaborate because they don't have that organic mentoring in place.

Sometimes there's a feeling that women have about needing to do it alone and prove something. They may feel it's a sign of weakness if they do ask for help. Borrowing money may be on the same level, in their minds.

You meet monthly with female small business owners in peer groups that you've established. What encourages you about those women?

I believe that women who endeavor to own their own businesses do own their own future. I see a brilliance and a spark—an inspiration—about them, combined with hard work. They love what they're doing. Entrepreneurial women have a can-do attitude that makes them very coachable: They take information easily and will adjust and seek out resources.

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