Credit scores and average incomes of women-owned businesses have risen, but loan approvals lagged in 2020

The analysis of 40,000 companies finds a decrease in revenues and costs; Texas and California top states for loan applications from women-owned businesses

The annual Biz2Credit study of women-owned businesses found that although the incomes of women-owned businesses fell in 2020, their revenues increased, mainly because spending declined during the pandemic.

The study reviews 40,000 credit applications across the country for the entire previous year (2020) and examined the financial performance of small and medium-sized businesses owned by women in the United States.

In 2020, the effects of the pandemic have been particularly noticeable for women-owned businesses, many of which are less well funded than male-owned businesses.

Weaker financial indicators among women business owners are indicative of a lack of service and attention provided by traditional financial institutions. The analysis looked at financial metrics including annual revenue, operating expenses, age of the business, and personal credit rating of the business. business loan applicant.

Main conclusions:

Performance of women-owned businesses

  • Average annual income increased from $ 384,359 in 2019 to $ 330,226 in 2020.
  • Average earnings (annual income – operating expenses) of women-owned businesses increased to $ 181,770 in 2020 from $ 107,804 in 2019, largely because spending declined from $ 276,554 in 2019 to $ 148,455 in 2020.
  • Average credit score for women business owners increased from 590 in 2019 to 597 in 2020.
  • Best industry: Services (excluding public administration) represented 26% of women-owned businesses in 2020.
  • The percentage of business loan applications from women-owned businesses decreased by 2% in 2020, compared to 2019.

Comparison of female and male owned businesses

The study compared the health of male and female-owned businesses over the past year, and the numbers point to a bigger problem. Women-owned businesses are much less likely to apply for loans. Part of the problem is that, on average, their companies’ profits were less than half the profits of male-owned companies and their credit scores were lower.

Some specificities:

  • Female-to-male borrowing ratio: 27% of women vs 72% male registrations on Biz2Credit in 2020.
  • Average annual income gap: women-owned businesses ($ 330,226) earned $ 421,928 less on average than male-owned businesses ($ 716,842) in 2020.
  • Average credit score: On average, the credit score for womenthe companies owned (597) were 23 points less than male-owned businesses (620) in 2020.
  • Average loan size for women-owned businesses ($ 36,981) was 33% less than the average loan amount for male-owned businesses ($ 55,061) in 2020.
  • Average age of the company for women-owned businesses 5 years (60 months) was below the enterprise age for male-owned businesses 6 out of 20 years (72 months).

By industry, more than a quarter (25.8%) of women-owned businesses that applied for business loans in the past 12 months were in services (excluding public administration). Retail trade represented 17% of applicants, followed by healthcare and social assistance (9.5%), accommodation and food services (9.2%), construction (6, 2%) and arts, entertainment and recreation (5.5%).

Texas and California are the states with the most applications from women-owned businesses, followed by Georgia, New York State, North Carolina, Ohio, Pennsylvania , Michigan, Illinois and Tennessee.

The average amount funded for women-owned businesses ($ 39,731) was 36% lower than for male-owned businesses ($ 61,958) in 2020. After careful analysis, business-related factors including lower FICO scores, younger company age, and higher operating expenses played a larger role in this gap, rather than just gender.

Paycheck Protection Program (PPP) Round 2: Women-owned vs.Men-owned businesses

In December 2020, Congress allocated $ 284 billion for COVID small business assistance for a second round of the Paycheque Protection Program (PPP). Biz2Credit looked at its data from PPP loan applicants and found that 49% of PPP Round 2 applicants were female business owners (compared to all SBA lenders at 31%). The average amount approved for PPP Round 2 applicants who identified as female business owners on the Biz2Credit platform was $ 22,000, compared to $ 30,000 for those who identified as male business owners.

Jennifer Moore, a self-proclaimed “mom-entrepreneur”, sees the $ 20,000 PPP loan she secured with the help of Biz2Credit as a “lifeline” that allowed her to keep her business home. Stickers by Jennifer, Go. The mother-of-two creates planning stickers that she usually sold at craft fairs and other events in and around Wayne, Michigan.

“I couldn’t make money locally, and COVID made travel unsafe, so I had to figure out how to run my business entirely online,” Moore said. “When selling online, the key is speed. Customers want things fast. I have new cutting machines; now i’m ready to cut and send same day by Amazon prime. “

PPP funding leverages companies like Ms. Moore’s that work hard, adapt to new market realities, and embrace creative solutions, such as converting to become an online retailer. PPP is helping women-owned businesses weather the coronavirus storm.

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