Annual Revenues, Profits, and Credit Scores of Women-Owned Businesses Improved in 2015, According to Biz2Credit Study
Study of 35,000 Companies Finds Average Revenues of Women-Owned Businesses Increased 12% in a Year-to-Year Comparison
Average annual revenues and loan approval percentages of women-owned companies increased significantly last year, according to Biz2Credit.com, a leading online credit marketplace, which analyzed more than 35,000 applications from business owners on its platform during 2015.
Average annual revenues of women-owned business jumped to $142,804 in 2015, up from $127,222 in 2014. Further, revenues increased by12% in a year-to-year comparison. Meanwhile, average earnings rose to $72,529 in 2015, up from $67,950 in 2014.
In comparison, businesses owned by men generated about 60% more revenue ($229,115) on average than women-owned businesses. Further, average earnings for male-owned businesses were 61% higher ($117,096) than for companies owned by females.
"Ideally, we would like to see the gender gap close over time," said Biz2Credit CEO Rohit Arora. "Part of our mission is to help women-owned businesses to secure funding to grow their companies."
Meanwhile, average credit scores for women-owned companies remained flat in 2015, coming in at 600. At the same time, average credit scores were 15 points higher for businesses owned by men (615) in 2015.
"Favorable economic conditions in 2015 resulted in good credit scores overall, on average, for both men- and women-owned businesses," said Arora, one of the nation's leading experts in small business finance. "A credit score of at least 600 points is the benchmark of where entrepreneurs should want to be, if they are in the market for funding. Basically, if you have a lower credit score, loans will be more expensive. In other words, interest rates will be higher."
The Biz2Credit report showed that the number of women-owned companies seeking funding on the Biz2Credit platform in 2015 increased by more than 130% from 2014. The average age of women-owned businesses applying for funding in 2015 was 35 months, up from 31 months in 2014.
"Improved economic conditions and historically low interest rates have created an atmosphere perfect for entrepreneurship," Arora explained. "As Age of Business goes up, presumably companies are thriving. Longer established businesses are typically more creditworthy."
Approval rates for women-owned businesses were 33% lower than for male-owned businesses.One aspect of this may be that the default rate of female owned businesses is higher than those of male owned operations.
"There are many factors that come into play when considering loan approval rates, a business's track record of revenue and credit scores are among the most important, the wide margin is cause for concern and the SBA, among other organizations have implemented initiatives in recent years to help narrow the gap and inspire better financial health."
- Average earnings for women-owned businesses rose to $72,529 in 2015 from $67,950 in 2014, an improvement of close to 7%.
- 130% more women-owned businesses applied for credit in 2015 than in 2014.
- The average credit score for women-owned companies remained unchanged at 600 in 2015.
- Retail trade businesses represented 17.54% of the women-owned companies in the study, the largest category of businesses.
Statistics: Women-owned vs. Male-owned Businesses
- Women to Men Ratio: 27% vs. 73% registrations on Biz2Credit.com in 2015.
- Average Annual Revenue for women-owned businesses ($142,804) was $86,311 lower than the annual revenue of male-owned companies ($229,115) in 2015.
- Average Operating Expenses: Women-owned businesses had the same average operating expenses as male-owned companies. Expenses were 49% of earnings for both genders.
- Average Credit Score: On an average, the credit scores for women-owned businesses (600) were 15 points lower than male-owned companies (615) -- the same as it was in 2014.Average Age of Business (in months): 35 vs. 40 months for male-owned companies (the age of businesses applying for loans was lower for women-owned businesses).
- Charge-off rates: Net charge-off rates for women-owned businesses in Biz2Credit's lending portfolio was 1.25% in 2015, down from 2.03% in 2014, compared with 0.66% and 1.49% respectively for male-owned businesses in 2015 and 2014 respectively.
Tips and economic insights for female entrepreneurs seeking funding:
- Favorable overall economic conditions made it easier for women-owned businesses to get loans.
- "Marketplace Lending" by institutional investors in the small business credit marketplace is changing the industry. While big bank lending is up, they tend to focus on larger amounts. Marketplace lenders are charging attractive interest rates and offering longer terms, thereby taking market share from factors and cash advance companies.
- In the last year, the average age of women-owned businesses that applied for funding on the Biz2Credit platform had just under three years of business. Three years of credit history is typically what mainstream financial institutions look for, thus improving the probability of loan approvals. Online lending portals have made it easier for borrowers to reach banks, marketplace lenders, micro lenders and other types of financial institutions.
- Startup costs of all types of businesses have gone down. Companies don't need big offices, and many of them are hiring part-time employees who can work virtually from home on their laptops or tablets and smart phones.
Founded in 2007, Biz2Credit has arranged more than $1.3 billion in small business funding throughout the U.S. and is widely recognized as a leading online credit resource for startup loans, lines of credit, equipment loans, working capital and other funding options. Using the latest technology, Biz2Credit matches borrowers to financial institutions based on each company's unique profile -- completed in less than four minutes -- in a safe, efficient, price-transparent environment. Biz2Credit's network consists of 1.6 million users, 1,300+ lenders, credit rating agencies such as D&B and Equifax, and small business service providers including CPAs and lawyers.