Closing the gap: How to overcome obstacles as a female entrepreneur

Female entrepreneurs have unique challenges that their male counterparts don’t face in their pursuit of business success. One of those obstacles is unequal access to capital, which could mean the difference between success or failure for some women-owned businesses.

Despite applying for capital at about equal rates, 54 percent of men-owned businesses are fully approved for a loan compared to only 44 percent of women-owned businesses, according to the Federal Reserve Banks’ 2023 Small Business Credit Survey.

This trend is also seen with loans provided by the U.S. Small Business Administration. Male-owned businesses received 67.4 percent of all SBA 7(a) loans in fiscal year 2023, according to the SBA weekly lending report. Women-owned businesses (with 50 percent or more of ownership) received just 21.2 percent of these loans.

While unequal funding is a significant challenge to female entrepreneurs, several obstacles make owning a business more difficult. Let’s examine the obstacles female entrepreneurs face and how they can overcome them.

Challenges faced by female entrepreneurs

Female entrepreneurs face unique professional challenges, many of which were harder to overcome before the Women’s Business Ownership Act was passed in 1988. This legislation eliminated many funding barriers that kept women from applying for their own business loans; it also cleared the way for the expansion of Women’s Business Centers in the U.S. (in 1989, there were only four locations in the country; now, there are well over 100).

Though the tools for funding and success have become more accessible in recent decades, many obstacles remain. According to the U.S. Chamber of Commerce, capital, confidence, and market saturation remain three of the most significant barriers to women business owners. Here’s a look at statistics that show the upward battle women face on a regular basis.

Lack of financial support

Gender inequality

Racial disparities

How to overcome obstacles female entrepreneurs face

Overcoming obstacles is key to being a successful female entrepreneur. Here are a few tips to help you navigate challenges, foster resilience and thrive in business.

• Build a support network: Surround yourself with like-minded individuals who can provide mentorship and connect with women’s business organizations for additional guidance and encouragement as you start and build your business.
• Own accomplishments: It’s important to embrace your achievements as a female entrepreneur. Don’t shy away from celebrating milestones and confidently sharing your successes with the people in your life.
• Create work/life balance: Work-life balance is essential for your well-being. Prioritize self-care, set boundaries, delegate tasks and create time for family, hobbies and relaxation.
• Overcoming self-doubt: Self-doubt can keep you from going after your dreams, but if you challenge those negative thoughts, seek support and acknowledge past achievements, you can move past this obstacle.

Resources to help overcome obstacles

As more resources become available to women entrepreneurs, there are opportunities for women business owners to strengthen and grow their businesses. Ways to help you overcome obstacles to starting and growing your business:

Get certified

Various women-owned business certifications are available for women-owned businesses, both through the government and in the private sector. To certify as a women-owned business, you’ll want to follow an established certification program to optimize your opportunities.

Certified businesses have a chance to compete for funding that is specifically for women-owned businesses (certification ensures that your business and its ownership meet certain qualifications). In addition to the WOSB and EDWOSB certifications mentioned above, entrepreneurs may also look into the Women Business Enterprise (WBE) certification.

While certification does require paperwork and associated fees, it can vet your business to obtain future funding and opportunities.

Find business development resources

Several programs and organizations offer entrepreneurial mentorship programs to help build networking skills, business development, and women-owned certifications.

A few notable mentorship programs for women entrepreneurs include the Women’s Business Enterprise National Council (WBENC), a private third party that certifies women-owned businesses on behalf of U.S. corporations. Also, look for WBENC certification through city, county or state programs. A few more options include:

• The SBA offers access to mentorship for women business owners through women’s business centers, SCORE and small business development centers (SBDC).
• Look for mentorship programs on a local level. An example is Valley Venture Mentors, which was founded by Rick Feldman, lecturer in entrepreneurship, organizations, and society at Mount Holyoke College, a women’s liberal arts college. It builds, supports, and maintains a community to launch entrepreneurs and nurture startups.
• Female business owners of color can take advantage of the Minority Business Enterprise (MBE) certification with the National Minority Supplier Development Council (NMSDC) or a local MBE program. The requirements are that the mentorship program be at least 51 percent owned, operated, capitalized and controlled by a member(s) of a minority group who is the top executive officer. In addition, Minority Business Development Agency (MBDA) Business Centers work to promote the growth of minority-owned businesses and can help you find a mentor.

Find the right funding

To move your business on a forward trajectory of growth, you’ll likely need some type of funding during the startup and growth phases. Research your options to see which type of funding will be most beneficial for your business. There are options to fund your business through debt or no-debt financing:

Grants

Business grants for women are funds that don’t have to be repaid, and they’re often issued by a government entity, corporation, nonprofit organization, foundation or trust.

The federal government does not offer grants for starting or growing a business. But if you’ve started a noncommercial organization (such as a nonprofit) in medicine, technology development, or related fields, you could get some funding through specific channels.

Some business grants are available through state or local programs. You may want to go with a grant if you need funding that doesn’t require repayment, though you will be competing with many businesses to get awarded the grant. Here are a few resources:

• Grants.gov: Various government agencies offer grants at the federal level. Register to apply through Grants.gov and learn more about your legal eligibility for each funding opportunity.
• Small Business Innovation Research (SBIR) program: This program encourages small businesses to conduct federal research/research and development (R/R&D) projects in exchange for grants or various work contracts.
• Women’s Business Centers: Women’s business centers can help women entrepreneurs with business development and access to capital. Some lend money directly, and others help you find grants.
• There are also state and local-level grants you could leverage. To see what’s available, check out your state’s small business office. The U.S. Economic Development Resources and Small Business Development Centers can also provide a wealth of information.

Federal contracts

The government’s goal is to award 5 percent of all federal contract dollars annually to women-owned businesses. To ensure equal opportunities for women, competition for certain contracts is limited to businesses participating in the women-owned small business (WOSB) program, economically disadvantaged women-owned small businesses (EDWOSB) and the 8(a) business development programs, which are open to minority small business owners.

In order to participate, businesses must meet certain criteria and maintain WOSB certification through the SBA. Getting federal contracts makes sense if you’re looking to scale your business quickly without much capital and are willing to complete all the paperwork to qualify.

Business loans

Business loans provide funding to small businesses and traditionally come from banks, credit unions or online lenders. These types of loans can come with strict loan requirements, such as revenue requirements and a certain number of years in business. Depending on your creditworthiness, interest rates on a business loan can soar upwards and well beyond 30 percent, especially if you’re working with a non-traditional lender.

SBA loans are backed by the SBA but not given directly to businesses. Since these loans are partially guaranteed by the SBA, they tend to have more favorable terms than other traditional loans, including low interest rates and long repayment terms. SBA loans are a solid option if you can’t qualify for traditional business loans but need low rates.

Alternative lenders

Alternative lenders for small businesses are also worth exploring, especially if traditional banking is not in the cards for your business loan. These options may be more likely to approve funding even if your financial profile isn’t up to par. These funding sources may include:

• Crowdfunding. Instead of taking out a loan, crowdfunding allows small business owners to raise capital through a fundraising campaign.
• Angel investors. Angel investors are individuals who invest in your business while providing a deep level of mentorship. An industry association of angel groups, called the Angel Capital Association (ACA), estimates that there are more than 300,000 angel investors nationwide.
• Peer-to-peer lending. For greater accessibility, peer-to-peer (P2P) lending platforms connect entrepreneurs directly with investors. You may even be able to qualify for these loans with fair credit.
• Microlenders. Even if you have bad credit, you may still be able to qualify for a microloan. This type of business loan usually has a maximum amount of $50,000 and may have more favorable interest rates and loan terms compared to traditional business loans for bad credit.
• MDIs. Consider pursuing funding through a Minority Depository Institution. As banks owned and operated by minority communities, MDIs support underserved populations by improving access to credit, loans and other banking services that may not be an option at other institutions due to strict lending requirements.
• CDFIs. Like MDIs, Community Development Financial Institutions cater to underrepresented and minority communities and the women entrepreneurs within them. This increased access to affordable lending fosters economic empowerment, reduces disparities and promotes sustainable community development.

Bottom line

Female business owners face various challenges in growing their businesses, including gender disparities in pay, lack of access to capital and more caregiver responsibilities.

These disparities only deepen when you start looking at the research surrounding entrepreneurship for minority business owners. However, women business owners now have more access to business development resources than ever. They can get mentorship and training through programs and certifications designed specifically with women in mind.

When it comes time to get funding, women can search for the right business loan and learn to speak up if they believe they deserve approval from an unwilling lender. With the right skills and resources, women can continue to make progress and achieve success in business.

Frequently asked questions about women-owned businesses

• What holds female entrepreneurs back?

  Female entrepreneurs may be held back for a variety of financial and personal reasons. However, research shows that they don’t receive as much revenue as male business owners and are more likely to be denied a business loan. This could lead to a lack of momentum in establishing and growing their businesses.

• Why are there so few female entrepreneurs?

  While female entrepreneurs are underrepresented and face more challenges than male-owned businesses, women-owned businesses are growing and represent some of the fastest-growing groups of entrepreneurs. The National Women’s Business Council 2023 Annual Report states that women-owned businesses make up 23.8 percent of all employer firms.
  

• How do I register as a woman-owned business?

  To be formally recognized as a woman-owned business, you will want to obtain certification through the SBA or other formal program. This will require documentation reflecting your business’s ownership and leadership.

• Is a woman-owned business a minority business?

  Women-owned and minority-owned businesses are two distinct groups. Like other underrepresented groups, both have historically faced challenges in accessing financing and business resources. While a women-owned business is at least 51 percent owned by a woman or women, a minority-owned business is at least 51 percent owned by a member or members of a minority group, which includes Asian-Indian, Asian-Pacific, Black, Hasidic Jews, Hispanic and Native Americans. This is according to the Minority Business Development Agency, the federal agency that promotes the growth of minority-owned businesses.