New research reveals a massive gap in business borrowing between male- and female-led firms in the UK. Yet organizations led by men hold a shocking £9.5 billion (€11.2 billion) more business debt. By contrast, women-led charities only have £769 million (€904.7 million). That’s the equivalent of male-led businesses having over twelve times as much debt as women-led businesses. This begs critical questions about the equity and ease of access that female entrepreneurs have to funding.
Experts, including Andrea Reynolds, CEO of Swoop Funding, emphasize that the gap in funding is not solely due to financial literacy or readiness. For one, male entrepreneurs are more likely to apply for funding at an earlier stage in their business development. Their female counterparts are even less likely to take this step. This trend disadvantages women. Because of this, they tend to wait longer to seek out financing until their businesses are more advanced, leading to a vicious cycle.
The Financial Landscape for Female Entrepreneurs
The average business debt for male-led companies is £315,000 (€370,603.8) compared to £91,000 (€107,034.7) for female-led firms. That grim contrast shows the challenges women continue to encounter as they try to raise the capital they need to expand, innovate and implement.
Stacey-Rebekka Karlsson, founder of the cross-border PR and marketing company Goho Agency, lived on the frontlines of these issues. She was able to get a £25,000 (€29,405) government Bounce Back loan. Through this funding, she was able to solidify her business and ignite its expansion.
“We came out of the pandemic with a team who could deliver events, amazing PR and banging digital marketing so we could then offer our clients a 360 solution and we’ve managed to grow the business every single year since,” – Stacey-Rebekka Karlsson.
This loan gave her the immediate financial flexibility she needed. It allowed her to strategically broaden her scope of services and build her business.
Overcoming Funding Barriers
Andrea Reynolds pinpoints a few of the reasons why women might be reluctant to apply for funding. She adds that social conditioning makes it more likely for women to focus on saving rather than borrowing, causing a general wariness of debt to take root.
“We are always told that personal debt is something you should enter into with caution, perhaps because we have it ingrained that we should save up to buy the things we want,” – Andrea Reynolds.
Reynolds emphasizes the need to recognize that business debt is different than individual debt. Women need to stop thinking about business loans and start thinking about business investments in their ideas that will produce returns.
“But business borrowing is different: you’re not borrowing to cover a holiday or a nicer car, you are borrowing to invest in your idea and you should have planned for that investment to bring you a return that makes it worthwhile,” – Andrea Reynolds.
To close this disconnect, industry stakeholders suggest looking for precise backing from women-centric venture capital funds. These firms and angel investors are uniquely positioned to help expand access to capital. You’ll find different business accelerators as well, created specifically to help more women founders thrive in the UK. Programming from National Women’s Enterprise Week and the Women in Tech Network provide critical support. They also offer powerful recommendations to set women up to thrive.
Support Systems for Women Entrepreneurs
In addition to these accelerators, organizations committed to the UK Investing in Women Code can serve as valuable allies for female-led businesses. These organizations strive to advance equitable financing opportunities, ensuring that entrepreneurial ecosystems are more inclusive of all entrepreneurial talent.
For instance, the UK government offers grants specifically focused on female-led businesses. Among these is the Prince’s Trust Women Entrepreneurs Programme and the Women in Innovation Awards. Together, these programs help women overcome financial barriers and support them in building and scaling their businesses.
Reynolds finishes with a call on lenders to improve their strategies to serve black women entrepreneurs.
“Lenders could certainly be doing more to appeal directly to female business owners, particularly around start-up loans, as there is a time limit on when these can be applied for (three years from starting trading),” – Andrea Reynolds.
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