Access to Capital and Terms of Credit: A Comparison of Men- and Women- Owned Small Businesses

By Coleman, Susan | Journal of Small Business Management, July 2000 | Go to article overview

Access to Capital and Terms of Credit: A Comparison of Men- and Women- Owned Small Businesses


Coleman, Susan, Journal of Small Business Management


This article compares access to capital for men- and women-owned small businesses using data from the 1993 National Survey of Small Business Finances. Findings reveal that women-owned firms are less likely to use external financing as a source of capital. It does not appear, however, that lenders discriminate against women on the basis of gender in terms of access to capital. A second part of this study examines the terms under which women obtain credit to determine whether they are at a relative disadvantage from that perspective. Findings reveal that women-owned firms paid higher interest rates than men for their most recent loans. In addition, women-owned service firms were more likely to put up collateral than men-owned service firms.

Small businesses are an important source of economic growth and job creation. According to the U.S. Small Business Administration, there were over 22 million small businesses in 1994 employing 53 percent of the workforce (Facts About Small Business 1997). Small firms account for 50 percent of the gross domestic product and the majority of new jobs created. In terms of innovation, it is estimated that small firms produce twice as many product innovations per employee as large firms, creating new products, services, lines of business, and industries.

Access to capital is a critical issue for small businesses. Without sufficient capital, small firms are unable to develop new products and services or grow to meet demand. Insufficient liquidity is a frequently cited cause of small business failure. Unlike larger publicly held firms, small firms typically cannot access the traditional capital markets (Ang 1991; Weinberg 1994). Instead, small firms are heavily dependent on bank loans, trade credit, and "informal" sources of financing such as personal savings, credit cards, home equity loans, and loans from family and friends (Ang 1992; Ang, Lin, and Tyler 1995; Berger and Udell 1995; Binks and Ennew 1996; Cole and Wolken 1996; Petersen and Rajan 1994).

Small businesses owned by women represent an increasingly important part of the small business sector. The National Women's Business Council (1996) estimates that women-owned businesses represent one-third of all businesses, and that the number of women-owned firms is growing twice as fast as firms in total. The same study estimates that women-owned businesses employ almost six million people and are adding jobs much more rapidly than firms on average. A number of researchers have found that acquiring capital and dealing with financial institutions is particularly difficult for women business owners. Reasons cited include the small size of most women-owned firms (Coleman and Carsky 1997; Fabowale, Orser, and Riding 1995; Riding and Swift 1990); lack of financial sophistication (Brophy 1989; Brush 1992; Hisrich and Brush 1984; Loscocco and Robinson 1991); risk aversion (Chaganti 1986; Olsen and Currie 1992); and possible discrimination (Brush 1992; Neider 1987).

This study had three goals. First, it compared men and women-owned businesses in terms of their usage of various external credit products. Second, it identified firm characteristics or variables, including gender, that predict the likelihood of a firm using these same external credit products. Finally it examined terms of credit, including interest rate and collateral requirements, to determine whether lending conditions imposed on women business owners are more stringent than those imposed on men. The study also explored how the length of the relationship a firm has with a financial institution impacts on terms of credit.

The value of this study is that it uses a large national sample of both women and men-owned small businesses to explore differences between the two. Although a number of prior studies have been done on women-owned firms and their access to capital, most of the studies have been based on small samples or samples of women-owned firms only. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Access to Capital and Terms of Credit: A Comparison of Men- and Women- Owned Small Businesses
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.