The Market in Women Small-Business Owners

Article excerpt

Problem:

The managers of our bank are looking for a new growth market to serve. We've heard that woman-owned small businesses is an up-and-coming growth sector. What do we need to do to get more involved in this market?

In April 2001, the Census Bureau released its latest statistical report on women small-business owners, the "1997 Survey of Women-Owned Business Enterprises." The numbers prove what the casual observer would have already noticed, the number of small businesses owned and operated by women is growing. Between 1992 and 1997 the number of women-owned businesses increased 16 percent compared to the 6 percent growth for all firms. In total, there were 5.4 million majority women-owned businesses, the Census defining a majority-owned business as 51 percent of ownership. This means that women own 26 percent of nonfarm businesses in the United States today. Women-owned businesses tend to be sole proprietorships and smaller than the average firm. While only 2 percent of these firms have more than $1 million in receipts, around 7,400 have 100 employees or more. Seventy percent of these businesses are in service and retail trade, mainly small stores. Together these statistics illustrate a market waiting to be tapped by ba nkers who are willing to make the effort to woo the woman business owner.

The National Federation of Women Business Owners reported in 1998 that 52 percent of women went to banks to finance their businesses, while only 34 percent had credit lines of $50,000 or more. Only 39 percent of fast growth firms owned by women have commercial bank loans. A Stern Marketing Group survey in February 1999 found that 62 percent of female managers surveyed felt neglected by their financial institution. And yet women business owners are considered extremely loyal to their financial institutions. ("Study Says Women Business Owners Are Potentially Very Loyal," CBA Reports, February 2000). Banks need to do more to reach this profitable market, but how do women business owners differ from men? First, women tend to wait longer to even ask for financing. Obviously, bankers may want to consider more outreach, more door-to-door visits to find women who could use bank financing for which they don't know they are eligible. Also women are more interested in relationships, consulting with others and community involvement. Women prefer to build a long-term, trusting relationship with their lender as well as seeing the lender as a source for advice. They also appreciate doing business with an institution that has a social conscious and is active in its community. Women want to be treated with respect. One way to work with women business owners is to use women loan officers. Women Loan officers can offer comfort as well as trust. Women also want presentations to be fact based and their questions to be answered respectfully.

Sample bank programs

In recent years such major banks as First Union, Bank of America, PNC, Wells Fargo, National City, Fleet and Zions have recognized the potential of the women small-business owners market and have pledged billions to lend to this group. First Union trains its loan officers and staff on women's needs (including cross-selling such products as long-term care insurance) and tries to build strong relationships. It offers information packets and promotes its 24-hour access for the business owner. Bank of America created a Women's Financial Initiative in 1997, which focuses on women's needs in retirement, investment planning and business ownership. The Initiative offers educational seminars, cross-sells investment and business banking services, and builds relationships with organizations that educate women and girls in economics. …