Funding Female-Owned Ventures Makes Business Sense

(WOMENSENEWS)–With the current clouds over the economy, investors have good reason to take a closer look at female- and minority-owned ventures, according to Betsy Zeidman, director of the Center for Emerging Domestic Markets at the Milken Institute, an independent think tank in Santa Monica, Calif.

The markets of women and minority-owned businesses, according to a study on the subject authored by Zeidman, tend to be lower cost in terms of their overhead and faster-growing on arevenue basis than traditional markets. They are also usually niche-oriented and less subject to overall economic conditions. Also, low real estate costs and lower capital-investment requirements may make investing in such under-tapped markets more affordable and less risky to lenders.

“Companies must realize that this is a key business strategy–an imperative to future success,” says Zeidman, referring to lending institutions. Investing also helpsthese entrepreneurs and communities grow and prosper, adds Zeidman, a co-author of the report. Since the study was released, Zeidman says she has received a number of calls from financial institutions that are contemplating increasing their lending and investing activity with minority- and female-owned businesses. She says the study has also generated a fair amount of media interest, including television.

While the study offers an interesting and upbeat perspective for the future, women and minority business owners are all too familiar with the difficulties of obtaining financing from traditional lending sources. While more and more financial institutions, such as Chase Manhattan Bank, Wells Fargo, and Fleet Bank, have been active in lending money to female-owned ventures, they don’t represent the majority of lenders and investors in this country, according to women’s advocates.

“This study is right on the mark. The real growth in the economy is in women and minority-owned businesses, and it has been this way for quite a while,” says Terry Neese, co-founder of Women Impacting Public Policy, an advocacy group in Oklahoma City. “It can only stay this way with adequate funding.” Neese, an Oklahoma City resident, is a nationally-recognized advocate for small businesses and former president of the National Association of Women Business Owners in Washington.

A Resilient and Ready Investment Market

Neese adds: “There has been a great deal of talk about women and minority-run businesses, but a lot has just been talk. Many women business owners have had to turn to family and friends for help, and now those people may not have the money to give them in this tough economy. Now is the time for many more financial institutions to step up to the plate and really reach out to this market.”

If lenders are to really make a difference in the future economic growth of the nation, they should consider themselves partners with small business owners, Neese says.

Financial institutions would particularly benefit by supporting female- and minority-run ventures, since these are the businesses that have been the most stable during the country’s economic downturn, says Phyllis Hill Slater, president of Hill Slater, Inc., a Great Neck, N.Y., engineering and architectural support firm. Small ventures are basically holding the country together and are currently employing more people than the Fortune 500 companies, contends Hill Slater, a small-business advocate.

“Women-run small businesses are keeping the economy going and are growing twice as fast as big companies,” Hill Slater said. “In my part of the country, on Long Island, the recession has not been felt as much since the area is small-business driven. There’s all the proof you’ll need to the strength and endurance of small businesses.”

The power of small businesses is very important to the two counties that make up Long Island. For example, out of the 47,201 businesses of any size that exist in Nassau county, 42,259 of them have fewer than 20 employees, notes Pearl Kamer, chief economist with the Long Island Association, Inc., a local business organization. In Suffolk county, out of the 43,465 businesses of all sizes, 38,770 have under 20 employees. “Small businesses, some of which are run by women and minorities, are crucial to the overall economy and success of Long Island,” Kamer says.

Female-Run Ventures Want to Grow Too

Christine Bierman, chief executive officer of Colt Safety, Fire and Rescue, a St. Louis distributor of safety gear, says that–based on what she has heard from other female owners of small businesses–she gets the feeling that some lenders assume that businesses run by women and minorities can stay small.

“We want to grow our businesses just like any other entrepreneur and we capitalize to do that,” says Bierman, whose 22-year-old company employs 17 people and has $5 million in annual sales. “Some lenders have jumped on the bandwagon, but there are still so many that can be helping women-owned firms expand to that next level and really prosper.”

True improvement for small businesses will come when budding entrepreneurs don’t have to rely on credit cards or family and friends to provide them with capital, says Patrice Tanaka, chief executive officer and co-founder of PTandCo., a 12-year-old New York City public-relations firm with 37 employees.

“This needs to change and women-owned businesses need to be looked at for their individual merit, rather than all painted with the same brush,” Tanaka said.

Even though financial institutions need to more actively pursue funding female- and minority-owned businesses, it is up to these entrepreneurs to network and make the connections as well with these sources of capital, says Diahann Lassus, co-owner of Lassus Wherley and Associates, P.C., a New Providence, N.J., financial-planning firm.

“Women have to be proactive and get to these organizations through professional affiliations and connections. They need to push the people with the dollars and just keep on pushing,” she says.

Laura Koss-Feder is a freelance business and features writer who covers small businesses and career/workplace topics. She has written for The New York Times, BusinessWeek, Time, Money, Investor’s Business Daily, Newsday, Family Circle, MSNBC.com, and Self.