If the gender gap between men and women’s wages isn’t troubling enough, take a look at the differences in earnings between male and female owned small businesses. Average sales receipts of women-owned businesses are only 25% of sales receipts of men-owned business, and the annual earnings ratio between self-employed women and men is 55%, well below the ratio between non-self employed women and men, according to a 2013 report by the U.S. Department of Commerce.
Those numbers don’t indicate a gap. It’s more like a chasm.
What’s Going On?
It would be great to be able to point to one specific problem that, if fixed, would close the entrepreneur earnings gender gap. But there are, of course, many factors at play here, including the types of businesses women choose to start, the funding they receive (or rather don’t), barriers to training, and even the amount of time they spend working in their business. (Many of these topics are covered in the US Department of Commerce report referenced above.)
Access to capital is certainly one of the factors that may be hampering the growth of these firms. Only 4% of all small business loans goes to female entrepreneurs, according to a 2014 report by the Senate Committee on Small Business and Entrepreneurship, which also found that just $1 of every $23 in conventional small business loans goes to a woman-owned businesses.
Credit scores shouldn’t be the source of that funding gap. Our data at Nav show that business credit scores of male and female owned businesses are quite similar. And Experian found that the average credit scores of men versus women were just a single point apart.
Entrepreneurship offers one of the best opportunities for women to close the wage gap, and I believe we should be doing everything we can to encourage and support female entrepreneurs. Roughly two thirds of household breadwinners and co-breadwinners are women, and helping them build successful businesses will help raise families, and even communities, out of poverty.
Certainly progress is being made. Last year, the federal government awarded the highest percentage of federal contracting dollars ever to women-owned businesses. And the National Association of Women Business Owners reports that one in five firms with revenue of $1 million or more is woman-owned, and that 4.2% of all women-owned firms have revenues of 1 million or more.
This is Women’s Money Week and I’d encourage us to find ways to support women owned businesses; from buying their products and services, to participating in or supporting training and networking groups that serve them, to endorsing initiatives such as ChallengeHer that helps open the doors to federal contracting opportunities for women-owned businesses. For my part, I’m proud to be working at Nav, which is helping educate small business owners—including women-owned firms—on ways to build strong business and personal credit ratings, and then leveraging their credit ratings to get better financing.
Building a bridge that will close that chasm won’t happen overnight. But we can each do our part.
This editorial reflects the opinion of the author.
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This article was originally written on March 8, 2016 and updated on February 2, 2021.
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