Sunday Conversation: It’s a misconception that women entrepreneurs aren’t getting SBA loans. So why aren’t more women applying?

Studies by the U.S. Small Business Administration show that women entrepreneurs are far less likely to apply for a small business loan through the SBA than men, even though statistically speaking, they’re just as likely to be approved. According to a study by the Kauffman Foundation, women entrepreneurs rely more heavily on personal and internal resources rather than external financing compared to male entrepreneurs.

Abigail Gonzalez, economic development specialist for the Houston division of the SBA, set the record straight to debunk the myth that women aren’t likely to be approved for loans. Gonzalez also discussed the numerous free programs through the SBA to help all entrepreneurs, especially women, build their businesses.

Can you start by explaining SBA loans and why they’re so helpful to small businesses?

The SBA as a federal agency has various resources for all people who are looking to start a business. The SBA has SBA guaranteed loans that are available for anyone who is looking to start a business, grow a business or maybe export a service or a product. Those are utilized through SBA participating lenders. So the SBA does not provide the money directly to the applicant, but the small business owner can apply through a lender to access an SBA loan.

SBA loans can be used for almost anything, including working capital, building a new building or buying a new business. What we do is we reduce the risk for the lender to make it easier for small businesses to access capital. That makes it easier for small business owners to get loans.

The SBA recently concluded a study geared towards ascertaining whether or not women were less likely to be approved for SBA loans. What can you tell us about that study and its findings?

We looked back on the past 10 years of lending in Houston to see if the common opinion about women not getting funding for their business was correct. So what we wanted to do is, we wanted to review our data to see if women are receiving SBA funding. Does the SBA funding fairly represent the proportion of businesses that are owned by women? And is there any room for growth or for change there?

The research does state that women are no less likely to be approved when they do apply, but they’re not applying as much. Because another data point they looked at in another research study cited that women are less likely to apply for loans, and they're more likely to rely on their personal savings and other resources rather than applying for loans.

Our focus here is to empower the women who are looking to access a loan so that they aren't reading certain headlines that may imply that women are not receiving any funding. Women are not receiving nearly enough funding to reflect the number of businesses that are owned by women. But it’s not because they’re being denied. It’s because they’re not applying.

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Why do you think women are statistically so hesitant to apply?

I think it could be a variety of things. For one, it may seem a bit daunting to look for a loan because there are so many of these anecdotal stories that say that women aren't receiving the funding. Or because a lot of small businesses owned by women are businesses that were created out of necessity, or they are a sole proprietorship and it’s a one-woman show.

We did speak to a small business owner here in Houston, Ana Rojas, fFounder and CEO of Orolait, a Houston-based breastfeeding apparel line. She was able to share her own story about being hesitant about pursuing loans.

She said that at first, in starting her business, she also just relied on savings and favors from her social network to do things like create her website. What I thought was really important is that she said that loans to her were a very scary idea. Because if you have a sense of fear that you're not going to succeed or the thought of owing someone money scares you, it sends a much bigger message to your value as a person and your ability to run a business.

It wasn't until she actually put the time in to speak to a lender to see what her options were that she learned that she could do this. It wasn't something that would be terribly daunting- this big, scary occasion. She got the information she needed, and ultimately she was able to get funding through the SBA Express program.

Going back to your original question, I think some of it was just hesitancy and not being fully aware of the resources that are available. I think that with any big step in life or entrepreneurship, it takes getting the right information and making a plan about how you're going to go about accessing it.

If someone does get denied a loan for some reason, what does the SBA do? What other resources does the SBA offer?

The SBA will help you determine what you need to do to get the loan. They’ll say, “OK, you need to work on your credit score or save a little bit more so you can have more of an equity injection into this loan.”

It’s about having a plan, setting it out and then going about getting that loan that you need to start or grow your business. We have SBA resource partners who are approved and funded by the SBA to provide free counseling to small business owners, and that includes the Small Business Development Centers, SCORE Houston, and the Women's Business Centers.

So an entrepreneur can go to any one of these resource partners for totally free advice on a business plan or marketing strategy, or just to talk about a business idea. They can also go to these resource partners to talk about their financing options, learn what options are out there and learn about their standing in terms of what they need to do to prepare to access a loan. We always recommend speaking with a resource partner before speaking to a lender, so that they are more prepared to speak to a lender and answer the questions about their business and even present a business plan.

So the SBA provides many free resources that a lot of people don’t know about and are actually paying for through consultants?

A lot of people don't think about the fact that we have resource partners who offer free counseling. These resources are completely free, they're already paid for through tax dollars. So there is no need to go out and pay hundreds of dollars for these same services that are already available to small businesses here in Houston and all over the country, completely free of charge.

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What would you say to a female entrepreneur that’s feeling some trepidation about taking the first steps?

I’d say, step one, work with our research partners with our Women's Business Center if you're more comfortable working with a woman who is an advisor. Or we have our other Small Business Development Center, and you can work with them to learn about your options to prepare your business plan and your financial projections.

My number one advice is that you do not have to do things alone. The SBA and the resource partners are here to help you to access these loans and to get you prepared. So if anything, that would be my first point of my first recommendation for any small business, but especially women who are considering lending but may not know exactly where to start or

My second piece of advice is to make sure you’re not asking for less than you need. The research and even anecdotal data has shown that sometimes women will ask for less money than they need. We want to share that message that you're no less likely to be approved than a man, so ask for the money that you need and go and be as prepared as possible.

Are there any other helpful programs we didn’t touch on?

The SBA has an Ascent tool. It's a free platform just for women entrepreneurs, and it has a lot of educational tools for women who are looking to grow or improve their business. I would refer women and any businesses there so that they can do some online learning on their own.

I think a lot of people are still unaware of certain resources that we have, because they will automatically think of disaster lending when they think of us. But the SBA does have non-disaster lending that can help you start or grow your business. We want to make sure everyone is aware of that.

Resources for the programs mentioned in this story may be found at the following websites:

Small Business Administration: www.sba.gov

SBA Ascent tool: www.ascent.sba.gov

SBA Women’s Business Center: https://www.sba.gov/business-guide/grow-your-business/women-owned-businesses