Women business owners still struggle to get bank loans

Entrepreneurs Marcia Cubitt, left, and Carrie Charlick on

Entrepreneurs Marcia Cubitt, left, and Carrie Charlick on July 31, 2014, in their Michigan warehouse. The two have $4 million in sales for their lingerie line, Essential Body Wear, but have been rejected for credit lines. (Credit: AP / Paul Sancya)

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Women are a growing force in the business world, but if they own a company, they may still struggle to get a loan from a bank.

Carrie Charlick and Marcia Cubitt have $4 million in sales but have been rejected for $500,000 credit lines since 2012. Their 11-year-old company, Essential Body Wear, sells women's underwear at parties at customers' homes. That's a problem for bankers, Charlick says. Because the business, based in the Detroit suburb of Commerce Township, doesn't have a traditional structure and sells directly to the public, banks keep saying no.

"We don't have receivables, and we don't own a building," she says. "We don't have collateral."

Male loan officers have also made inappropriate comments about the fact the company sells lingerie. Charlick is convinced that they have a problem with women-owned businesses.

Women owners have long been at a disadvantage getting loans. Some states required husbands or other male relatives to cosign business loans until the practice was outlawed by the Women's Business Ownership Act of 1988. But women's business loan approval rates are still between 15 percent and 20 percent below men's, according to the online lending marketplace Biz2Credit.com.

Several factors contribute to the problem. Banks historically have been gun-shy about small businesses, and that caution increased due to stricter government regulations after the 2008 credit crisis. Often, women-owned businesses are young, making them look risky to lenders.

And overall, women don't look as creditworthy as men. Their credit scores in 2013 were on average 20 points below men's, an improvement from 40 points in 2012, but still a significant difference, according to Biz2Credit.

But women owners may also hurt their chances for approval.

"Women don't ask, 'What do I need to do to get ready to borrow?' " says Maria Coyne, head of small business banking at KeyBank.

Many women-owned businesses don't have enough revenue and cash flow to convince bankers they have the ability to handle their debts, says Lisa Stevens, head of small business banking at Wells Fargo & Co. More than two-thirds of women-owned businesses have less than $25,000 in revenue, Stevens says.

Some make a poor impression when they show up at the bank. "They don't take the time to prepare paperwork. They don't have the proper documents," says Frank Gallo, a commercial loan officer at Tropical Financial Credit Union in South Florida.

The problems may come from a lack of confidence that would allow them to be aggressive about their companies, says Barbara Kasoff, president of Women Impacting Public Policy, an advocacy group. "You need to let the bank know you're a good bet and they can invest in you and they can get their money back," she says.

And sometimes, women need to look elsewhere for financing. When Alicia Hill needed money for a second Workout Anytime fitness club in suburban Atlanta, she applied to her current bank, expecting her three years of successfully running a club to make approval easy. Instead, the bank emailed her two months later saying she needed to use her savings as collateral.

"It didn't make sense to me. We needed that cash in case we needed to fund the business," she says.

Hill got a loan within weeks from a financing company. She had been wary of financing companies, believing they would charge a higher interest rate. But the rate she got turned out to be only slightly higher than a bank loan. And the company had a more realistic view of her ability to repay the loan than the big bank she had a 15-year relationship with, Hill says.

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