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 Advice for Women Entrepreneurs to Acquire Growth Capital - In the Hunt

Still a Long Way to Go

While these results are encouraging, there is another side of the coin: A great many other women entrepreneurs still face challenges when it comes to obtaining growth capital. While the 1973 Equal Credit Opportunity Act prohibited discrimination in credit access on the basis of sex, and the 1988 Women's Business Ownership Act amended that to include business loans and prohibit lenders from inquiring about marital status or a spouse's occupation, many in the financial community still let gender influence their decisions, Weeks says. "You still hear a lot of stories of women saying, 'On paper, I look just as good as the guy down the block, but they're not giving me the money,'" she says. "There's still this sentiment that 'she's not going to be as serious about this,' or 'she doesn't have the desire for growth that a man might.' There's a lot less of that than there used to be, but it still exists."

That may partly explain why women are less inclined to seek outside sources of financing to fund growth. For example, nearly 60 percent of NAWBO members list business earnings as a preferred source of capital, while according to the Center for Women's Business Research more than 80 percent of women owners of $1 million firms intend to use business earnings as a source of capital. What's more, only about half of the women who own $1 million firms use business or commercial bank loans or lines of credit, compared with 70 percent of men who own $1 million firms.  

Of course, there's not anything wrong with avoiding outside sources of capital if that's your preference. Just ask Liz Elting, president and CEO of New York-based Transperfect Translations, a translation and language-services firm. Over the past 12 years, Elting has grown her business from a two-person operation run out of a graduate-school dorm room to a multinational, multimillion-dollar firm. And she's done it all with almost no outside financing. "I just don't like debt," she says. "Instead, I've taken the attitude of 'I'll work with what I have.'"

What that means is avoiding extraneous expenses--the company recently bought new office furniture for the first time--and being as strategic as possible when it comes to controlling costs. For example, Transperfect has a policy to promote from within, thereby fostering employee loyalty and avoiding the expense of recruiting, hiring, and training highly compensated senior management. The company also emphasizes relationship building and revenue generation above all else. It seems to be working, as the company has maintained profitability throughout its 12-year history. "We don't do things until we can afford to do it on our own," Elting says.

But that's not the same as avoiding growth. In fact, in 2000 Elting's company was recognized as one of the fastest-growing privately held companies in the country, when it made the Inc. 500, an annual list published by Inc. magazine. And Elting is anything but a shrinking-violet business owner. In 2001, she received the Ernst & Young Entrepreneur of the Year Award; three years later, she was recognized as Woman of the Year by American Express and Entrepreneur magazine.

It Comes Down to Education

In the end, Elting made a conscious decision to avoid external sources of financing. For many other women entrepreneurs, that determination is much less deliberate. "It sounds almost too simple to be true," admits Sharon Hadary, executive director of the Center for Women's Business Research. "But I think that women need to be educated in the various types of financial tools and instruments that are available to them."

In fact, while some members of the financial community believe women entrepreneurs are more risk-averse and less ambitious than their male counterparts, the truth may be quite the opposite. "Women tend to get stuck at a certain level of growth," says Susan Preston, a Seattle attorney, co-founder of an all-women angel investor group, and entrepreneur-in-residence at the Ewing Marion Kauffman Foundation. "But I believe the vast majority of women have a desire to grow their company to the next level. They just don't know how to do it."

It's a Two-Way Street

Books like this one can help fill the education gap, but women also need to seek out the advice, guidance, and partnership of the lending and investing community. "Women business owners need to become more sophisticated and more confident in their dealings with the financial community," says Jayne Huston, executive director of the National Education Center for Women in Business at Seton Hill University outside Pittsburgh. "They need to negotiate, they need to ask questions, they need to partner and ask, 'How can you help me? How can we take this to the next level?'"

Tapping into the knowledge and resources of the financial community is key
to future growth and success, Hadary agrees. "I think that one of the things women have not done well in the past is make their financial adviser, banker, or investor a partner in their business planning," she says. "As I talk to groups of women business owners, time and again what separates the larger and fast-growing businesses from the rest is the fact that they have a relationship with these advisers."

Just remember, Weeks says, a relationship is about more than opening a checking account or applying for a line of credit. While many financial-services firms are currently developing programs for women entrepreneurs, they're not necessarily helping them achieve the growth they aspire to. "They're getting them in the door, but then they're kind of forgetting about them," Weeks says. "The financial community needs to think more proactively about women and their businesses, and not pigeonhole them into outdated stereotypes. Instead of saying, 'Here's a credit line for $20,000,' they should be saying, 'Why don't we increase this to $100,000 and see what you can do then.'" Weeks continues: "I think we're entering a phase where the operative phrase would be 'Meet me halfway. Women-owned businesses, and the organizations that represent them, need to come together and say, 'We're educating ourselves about the financial tools and options. Why don't you, the financial community, help us?' I think that's how we will achieve true growth and success."

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