Women Entrepreneurs and Access to Financial Capital

Women with question mark

Women are much more likely than men to self-finance their business. Rather than go into debt or sell shares, women commonly use personal savings, earnings from the business, home equity loans, credit cards, and family loans to finance their business. In this third in our series of articles for NCWIT and the Kauffman Foundation on the under-representation of women entrepreneurs in the IT field, we survey the social science literature for what it says about the gendered difference in access to capital for entrepreneurs.

Social science literature from the 1970s to the early 1990s often pointed to discrimination against women in access to capital for their businesses, but that claim is now much less likely to be made. Recent scholarship shows that the characteristics of women-owned businesses may explain why women obtain smaller loans, pay higher interest rates, must put up higher collateral, experience a higher incidence of unmet credit needs, and express lower satisfaction with the bank loan process. Evidence to date suggests that gender differences in types of funding sought and experiences when seeking funding exist for the most part due to women's concentration in poorly-funded industries, and perhaps due to their lack of technical education and their underrepresentation among investors. Access to funding for women in high-tech industries may be particularly difficult, but only one study has considered this issue.

To see this literature review, click here. You can also find the two previous literature reviews on gender differences in firm growth, and the effect of psychological factors, on this page.

William Aspray and J. McGrath Cohoon are NCWIT social scientists conducting research on women and IT entrepreneurism as part of a project supported by the Kauffman Foundation.