Why Don’t Our Banks Take Female Small Business Owners Seriously?
Three years ago, I decided to apply for a bank overdraft because I had hired my first employee and I began dealing with seasonal cash flow. I thought an overdraft was a good safety net to ensure that I could meet payroll commitments.
As a former accountant and Chief Financial Officer for companies, I have worked with bank managers and financial institutions so I am familiar with their lending criteria and understand how risk averse they are. However, with that same knowledge I remained confident that an overdraft was achievable.
I arranged an appointment with a bank manager who I used to deal with (thinking that the relationship would help) and he introduced me to his team member who handles small business loans. In our meeting, I showed up with a 50 page well designed business plan that includes all of my financials as well as cash flow projections. I knew that my young business could be an issue so I offered $37,000 security of my investment property which is loaned by this same bank for the overdraft facility.
The first question I was asked was “what does my husband do and is he supporting me and my business?” Even though I handed them profitable profit and loss statements, my credentials and my property details, he was very keen to have my husband’s financial details which were irrelevant to my business details.
I had previously approached my bank that dealt with my business account but the local branch manager would not consider my application unless I refinanced my property with their bank. This approach is actually quite typical with all of the banks even though they can just have a “charge” over the property I offered as security. Hence why I went to my own bank which I thought would make the process easier.
Unfortunately, even though the numbers looked good, the bank manager quietly told me that this bank does not lend to “hobby” businesses and suggested that I go with one of their competitors who are more small business friendly. I left with the feeling of confusion. I have had many years of experience working and negotiating with banks so how come I could not even get a small overdraft facility for my business as a business owner?!
I found out later that this experience of mine was not unique and the more I discussed with fellow women entrepreneurs, the more I found out that they had similar experiences whether it was a case of applying for a low balance credit card to a small business loan. They had to convince the bank that their business was not just a ‘hobby’ business while they are looking after their young children.
Despite the fact that 34% of Australian business operators are women, access to finance is still a major hurdle for women entrepreneurs. So are Australian banks the only source of access to finance to grow and scale your businesses? Fortunately, the answer is a resounding no.
The “Fintech” revolution has opened up more options not just for the consumer finance but also for the business owners in general. Online small business loan lenders such as SpotCap or Peer to Peer lending platforms like ThinCats can help small business owners to access finance to help them manage their working capital as well as scaling their business for growth. Paypal is one of the payment providers that offer working capital solutions that would suit retailers to help manage cash flow.
Non-bank lenders are paving the way to offer a better access to finance option for women small business owners than the traditional banking. It is still important as part of the lending criteria that the business can service the loan but at least you are less likely to get asked about your marital status or how your husband is going to support you. Funnily enough, I do not believe that men get asked about their wives’ financial support. Unless I’m wrong.
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