Opportunity Knocks Women's access to capital widens with the help of a new SBA program.

Not very long ago, the only thing that seemed to exceed womenentrepreneurs' need for financing was the disdain with whichmany bankers treated them. As a result, many women were forced tofinance their businesses using alternative (some might saydesperate) means such as credit cards or loans from friends orfamily members; others simply lost hope of ever starting orexpanding their businesses. It seemed we'd never see the daywhen bankers would accept a woman's business loan applicationwith a straight face.

Yet in a relatively short period of time, that scenario haschanged dramatically. Perhaps one of the greatest recent successesof the Small Business Administration (SBA) has been its Women'sPrequalification Pilot Loan Program, which helps women seekingloans of less than $250,000 complete their loan applications andpresents their bankers with an SBA guarantee of the loan. Since itsintroduction in June 1994 from 16 pilot sites, the PrequalificationProgram has helped 574 women receive federally guaranteed loanstotaling almost $59 million. President Clinton expanded the pilotprogram to a nationwide basis in October, explaining, "I wantto build on a program that is plainly working."

"Two years ago, many bankers would tell women, `Don'teven bother to get your loan application package together--it'snot worth your time,' " says Sherrye Henry, director ofthe SBA's Office of Women's Business Ownership. "Theystill hadn't gotten the message that women business owners wereemerging as an extraordinarily strong market, and they weren'tputting any time and effort into [lending to women]."

At that point, says Henry, the SBA asked Congress forauthorization to establish the Prequalification Program, whichoffered women business owners a letter of prequalification from theSBA to take with them as they shopped around for loans. Centerednot on collateral, but on character, credit and the applicant'sability to repay the loan from earnings, the PrequalificationProgram not only succeeded in getting women over a large hurdle--italso drew them into the world of lending possibilities.

"A lot of women entered the loan process who otherwisewouldn't even have tried," says Henry, who points out thatwhile some succeeded with the Prequalification Program, many otherswere redirected to the SBA's Low-Doc and Microloan programs."It was that extra tool in the arsenal that got more women tofocus on how to present themselves to banks."

Though President Clinton has announced that the federalgovernment will make the Prequalification Program available towomen in every state in the United States, the process is not quitethat simple. "Nationwide access" simply means every SBAdistrict director has the option of offering this program; it doesnot, however, guarantee that all SBA offices will jump at thechance. "The district director, in consultation with theregional administrator, will decide whether to take on theprogram," says Henry. "We fully expect every districtdirector to do that, but internally, sometimes it's better togive people choices."

"So far, word-of-mouth reports show people are extremelyenthusiastic about the opportunity," says Wendy Goldberg,former press secretary of the SBA. "But it's still tooearly to tell how many of our district offices are going toparticipate."

Henry suggests women business owners interested in the programvoice their opinions by asking their local SBA offices to adopt theprogram. "If women business owners made their thoughtsknown," says Henry, "it would make a bigdifference."

The Prequalification Program has already made a big differencein the banking landscape. "One of President Clinton'sdirectives to the SBA when he first took office was to increaseaccess to capital for all entrepreneurs," says Goldberg."This program is filling a need in the market--it'sreaching a sector of the economy that has been traditionallyunderserved."

"Let's put it this way," says Henry. "We have574 women in America today who would not have gotten loans withoutthis program. This is not to say that the barriers aren't stillthere for a lot of women, or that all banks have gotten themessage, or that we don't have a long road to travel before wemake credit as available to women as to men. But we have come along way in a short amount of time."

For more information, call (800) 8-ASK-SBA.

Capital Improvements

As Julie Weeks, research director for the National Foundationfor Women Business Owners (NFWBO), sees it, the relationshipbetween women business owners and bankers four years ago isanalogous to the relationship between Dorothy and the Wizard of Oz."You went through these large doors, down a longhallway," Weeks explains, adding that today, fortunately,"women and bankers treat each other more likeequals."

A recent NFWBO study verifies that women entrepreneurs are muchmore likely to be satisfied with their banking relationships thanthey were four years ago, as the number of women reporting one ormore problems in working with their banks dropped by 15 percent.The number of women who used credit cards as a source of capitalwas down to 23 percent, and nearly three-quarters of women surveyedwere using business earnings to finance their firms.

"There's been a tremendous improvement in access tocapital among women-owned businesses," says Weeks."Between 1992 and 1996, women business owners' use ofcredit cards dropped by half, their use of business earningsdoubled, and their banking relationships improved. Today, men andwomen are similar in where they get their capital for theirbusinesses, whereas four years ago, they were not at allsimilar."

Why, after decades of struggles, have women suddenly shotforward in the capital game? "There's been improvement onboth sides," says Weeks. "Not only have women businessowners become more savvy about these matters and boast businessesthat are more stable and mature, but the banking community hasexperienced an awakening. They've made tremendous efforts toreach out to women business owners and have taken a proactive rolein making the relationship better."

In fact, so rosy are the study's findings that Weeks haseven managed to find a silver lining in the cloud that used toplague women. About half the men and half the women have bankcredit, but they use it for different purposes. Men business ownersare more likely to use it for evening their cash flow or forconsolidating debt, whereas women are more likely to use it forgrowing their businesses. "Women don't have debt they haveto consolidate," muses Weeks, "because they didn'thave the access four years ago that would have allowed them toincur it."

Contact Sources

National Foundation for Women Business Owners, 1100 WayneAve., #830, Silver Spring, MD 20910, (301) 495-4975;

Office of Women's Business Ownership, 409 Third St.S.W., Washington, DC 20416;

Small Business Administration, 409 Third St. S.W.,Washington, DC 20516, (800) 8-ASK-SBA, (http://www.sba.gov).