Female SME owners feel discriminated against by high street lenders

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Female business leaders are facing gender inequality in commercial lending, which is hampering the growth ambitions of many SMEs, according to new research from SME funder Bibby Financial Services (BFS).

Data from BFS’s latest SME Confidence Tracker, which surveyed 1,000 UK SMEs, found that 66% of women business leaders believe that banks are less prepared to lend to businesses like theirs, while 57% say it’s more difficult to access external finance than it was six months ago.

According to official figures, corporate insolvencies hit a 30-year high in England and Wales in 2023, and BFS’s latest data reveals that more than half of SMEs overall (54%) have experienced the insolvency of a supplier in the past six months, and a similar proportion (51%) have seen customers fail.

Lucile Flamand, chief strategic development Officer at BFS, said: “According to the Rose Review, £250bn in value could be added to the UK economy if women matched the number of men starting and scaling a business, and a critical dependency of this is being able to access finance. With many high street sources re-appraising their risk appetite for SME lending owing to rising insolvencies in the past year, systemic bias could be intensifying the issue for women-led enterprises, despite data showing that women-led businesses are less likely to face administration.”

According to analysis from Female Founder Finance and mnAi, just 2.9% of women-founded companies went into administration in 2023, compared with 14% of all male owned businesses during the same period.

Roxanne Goodman, founder of Female Founder Finance, an independent finance broker dedicated to improving access to finance for women-owned businesses, said: “Women-founded businesses are less likely to face insolvency, and typically want to borrow less than male-owned enterprises, but there seems to be a distinct lack of appetite from lenders to back these businesses. At Female Founder Finance, all too often, we hear examples of women owners being asked about their care responsibilities by lenders, which isn’t the case for their male counterparts. Despite commitments from public and private sector organisations, the situation hasn’t improved over the past 10 years.”

Among the 450 women SME owners and decision makers surveyed as part of BFS’s SME Confidence Tracker, interest rates, energy costs and cash flow were cited as the most prevalent challenges facing their businesses today, leading 60% to believe the current economic landscape is killing entrepreneurialism, compared to 53% of male business owners.

Flamand added: “While recent initiatives, such as the government’s Women-led High-Growth Enterprise Taskforce which aims to create £250 million in funding for female founders must be applauded, it is only the start. We first need to recognise gender imbalance in accessing finance as a lost opportunity for the economy, and then take tangible action to improve educational resources and support for women business owners, and ultimately to challenge inbuilt and unconscious bias in financing and investment. This isn’t an issue to be solved by the public-sector alone. Both private and public sector organisations need to come together to address this significant economic leak.”

Findings highlight disparity in the sectoral composition of the UK’s SME community by gender, also, with service-sector firms making up a third of women-led business, compared to just 13% of male-owned enterprises.

Emily Campbell, director at UK small business Campbell Environmental Oil, said: “I know first-hand how important my network has been in helping me successfully run my business. At every moment I’ve been surrounded by other entrepreneurs to advise me on what can be overwhelming decisions. For example, when it comes to funding your business, it can be hard to see what bigger trends or factors might be at play, helping or hindering you.

“But I am one of the lucky ones. Overall, women are less likely to have developed networks, which could hold them back from growing their business. That’s why it is important that we share our experiences to see the bigger picture, understand barriers and share learnings and advice so we can help female founders to have an equal chance of success.”

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