Reporting

October 26, 2012 by Alexandra Bjerg

What’s hindering womens small business boom in California economy?

Forget goblins, ghouls, and candy corn. This October, named National Women’s Small Business Month by the Small Business Administration (SBA), we celebrate the more than 8.3 million women-owned businesses nationwide.

Forty years ago, women owned just 5 percent of all small businesses. Today women own 30 percent, employing nearly 7.7 million people and generating nearly $1.3 trillion in revenues. 

For the past 15 years, women have been starting businesses at a rate of 1.5 times the national average. According to the second annual State of Women-Owned Businesses Report, commissioned by American Express OPEN the number of businesses in the U.S. increased by 37 percent between 1997 and 2012, while the number of women-owned businesses increased by 54 percent. Within the past year alone, women opened nearly 200,000 new companies, which is the equivalent of just under 550 new firms a day.

Despite the great gains, the report concluded that these firms have struggled to grow beyond the $250,000 to $499,000 revenue mark. Although technology and innovation has made it easier for women to start businesses, they are not immune to the difficulties their male counterparts experience when growing a business.

Limited access to capital is the greatest hurdle faced by female and male entrepreneurs alike, says, Heidi Pickman, communications director of CAMEO, the California Association for Micro Enterprise Opportunity, a group that provides development support for small businesses. Access to working capital may mean the difference between a new company’s success and failure.

Pickman says the two major causes of the lack of access to financial capital are the tight credit market and a lack of loan readiness on the part of small business owners.

"Since the beginning of the economic crisis big banks have pulled back from lending less than $250,000," said Pickman. "Microlenders like community development financial institutions (CDFIs) have attempted to fill this lending gap, but few business owners know this option is available to them and there is no real incentive for banks to refer loan applicants to other banks or lenders."

On the other hand, business owners aware of alternative lending sources may not be "loan ready." For example, when Rosie Rodriguez wanted to expand her business King Tires in the San Joaquin Valley, she decided to take out a loan.

"As a result of not having her company’s financial ducks in a row, it took two years of business counseling by El Pájaro Community Development Corporation, a CAMEO member, for Rosie to qualify for the $1.5 million SBA loan," said Pickman.

Today King Tires continues to grow and employs 16 full-time workers in a region with an unemployment rate above 10 percent.

As the most populous state in the union, it makes sense that California is home to the largest number of women-owned firms, but in terms of the rate of growth, we didn’t even make the top ten.

"It is important that we continue to encourage women entrepreneurs from the full spectrum," said Pickman. "From Lydia and her taqueria to Rosie Rodriquez's tractor repair and auto parts business to Lisa Mortenson of Community Fuels, a biofuels firm."

Promoting business ownership by women and removing barriers to obtaining capital is critical to ensuring that women continue to start new businesses and grow existing firms that will reinvigorate the California economy. For this reason the California Economic Summit is working to enhance technical assistance and leverage existing funding sources to increase access to capital for all businesses. 

Even during these tough economic times, women-owned small business are thriving. Just imagine where California’s economy might be if women entrepreneurs had an easier time jumpstarting their business with capital and counseling.

Photo of Ginger Elizabeth Chocolates via Littlest Details Photography.

Categories: Capital, Small Business

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