Not very long ago, the only thing that seemed to exceed women
entrepreneurs' need for financing was the disdain with which
many bankers treated them. As a result, many women were forced to
finance their businesses using alternative (some might say
desperate) means such as credit cards or loans from friends or
family members; others simply lost hope of ever starting or
expanding their businesses. It seemed we'd never see the day
when bankers would accept a woman's business loan application
with a straight face.
Yet in a relatively short period of time, that scenario has
changed dramatically. Perhaps one of the greatest recent successes
of the Small Business Administration (SBA) has been its Women's
Prequalification Pilot Loan Program, which helps women seeking
loans of less than $250,000 complete their loan applications and
presents their bankers with an SBA guarantee of the loan. Since its
introduction in June 1994 from 16 pilot sites, the Prequalification
Program has helped 574 women receive federally guaranteed loans
totaling almost $59 million. President Clinton expanded the pilot
program to a nationwide basis in October, explaining, "I want
to build on a program that is plainly working."
"Two years ago, many bankers would tell women, `Don't
even bother to get your loan application package together--it's
not worth your time,' " says Sherrye Henry, director of
the SBA's Office of Women's Business Ownership. "They
still hadn't gotten the message that women business owners were
emerging as an extraordinarily strong market, and they weren't
putting any time and effort into [lending to women]."
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At that point, says Henry, the SBA asked Congress for
authorization to establish the Prequalification Program, which
offered women business owners a letter of prequalification from the
SBA to take with them as they shopped around for loans. Centered
not on collateral, but on character, credit and the applicant's
ability to repay the loan from earnings, the Prequalification
Program not only succeeded in getting women over a large hurdle--it
also drew them into the world of lending possibilities.
"A lot of women entered the loan process who otherwise
wouldn't even have tried," says Henry, who points out that
while some succeeded with the Prequalification Program, many others
were redirected to the SBA's Low-Doc and Microloan programs.
"It was that extra tool in the arsenal that got more women to
focus on how to present themselves to banks."
Though President Clinton has announced that the federal
government will make the Prequalification Program available to
women in every state in the United States, the process is not quite
that simple. "Nationwide access" simply means every SBA
district director has the option of offering this program; it does
not, however, guarantee that all SBA offices will jump at the
chance. "The district director, in consultation with the
regional administrator, will decide whether to take on the
program," says Henry. "We fully expect every district
director to do that, but internally, sometimes it's better to
give people choices."
"So far, word-of-mouth reports show people are extremely
enthusiastic about the opportunity," says Wendy Goldberg,
former press secretary of the SBA. "But it's still too
early to tell how many of our district offices are going to
participate."
Henry suggests women business owners interested in the program
voice their opinions by asking their local SBA offices to adopt the
program. "If women business owners made their thoughts
known," says Henry, "it would make a big
difference."
The Prequalification Program has already made a big difference
in the banking landscape. "One of President Clinton's
directives to the SBA when he first took office was to increase
access to capital for all entrepreneurs," says Goldberg.
"This program is filling a need in the market--it's
reaching a sector of the economy that has been traditionally
underserved."
"Let's put it this way," says Henry. "We have
574 women in America today who would not have gotten loans without
this program. This is not to say that the barriers aren't still
there for a lot of women, or that all banks have gotten the
message, or that we don't have a long road to travel before we
make credit as available to women as to men. But we have come a
long way in a short amount of time."
For more information, call (800) 8-ASK-SBA.
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