Cracking the small business glass ceiling
Women entrepreneurs face longer odds in getting access to credit, capital and federal contracts
As the lead Democrat on the Senate’s Small Business Committee, I’ve had countless conversations with businesswomen from across the U.S. They are proud to be successful business owners and job creators. But they tell disturbing stories of barriers confronting women entrepreneurs that aren’t encountered by their male counterparts. They face longer odds in getting access to credit and capital, winning government contracts, and accessing the business counseling they need to succeed.
In a Harvard Business School study, potential investors watched two videotaped entrepreneurial pitches. The content of the pitch was identical; the only difference was the gender of the person delivering the pitch in a voiceover.
Sixty-eight percent of the investors chose to fund the venture pitched by the man’s voice, and only 32 percent chose to fund the one pitched by the woman’s voice.
It is a shocking fact that, as recently as 1988, many states had laws requiring women to obtain the signature of a husband or other man in order to establish business credit.
This legacy of sexism and discrimination partially explains why women today receive just 7 percent of venture capital funds, and why women-owned small businesses secure less than 5 percent of federal government contracts and account for less than 5 percent of the total value of all conventional business loans.
In July 2014, women entrepreneurs from across the country packed a hearing of the Senate’s Small Business Committee to demand reforms aimed at increasing women-owned small businesses’ access to federal contracts, capital and business counseling. It is unacceptable that the nearly 10 million women-owned small businesses are awarded less than 5 percent of federal contracts.
Soon after, I joined with Senators Maria Cantwell, D-Wash., and Kirsten Gillibrand, D-N.Y., to pass key elements of the Women’s Small Business Procurement Parity Act. This law will give women-owned small businesses more opportunities to compete for federal contracts, on par with other traditionally disadvantaged groups.
In addition, since access to credit is another huge challenge facing women-owned businesses, and because most women-owned start-ups require modest capital and are up to five times more likely to be approved for a Small Business Administration loan than a conventional loan, we passed the Small Business Jobs Act of 2010 to increase the maximum SBA Microloan amount from $35,000 to $50,000, while also creating a new Intermediary Lending Pilot Program to provide SBA loans between $50,000 and $200,000.
More than 100 SBA-funded Women’s Business Centers serve tens of thousands of clients annually, helping women-owned businesses to get off the ground or rise to the next level. For years, these centers have been hamstrung by funding uncertainty and a 1990s law that does not meet the needs of the 21st century. In October – in a fitting salute to National Women’s Small Business Month – our Small Business Committee passed legislation to reauthorize and modernize this very successful program.
This is progress, but we must do better. The glass ceiling in small business is not only holding back women, it is depriving our economy of vast human capital, creativity, and innovation. Warren Buffett famously said that one reason for his extraordinary success is that he was competing with only half of the world. It’s time to fully unleash the other half.
U.S. Sen. Jeanne Shaheen of New Hampshire is the lead Democrat on the U.S. Senate’s Committee on Small Business and Entrepreneurship.