To Her Credit offers targeted advice about personal finance based on unique challenges faced by women. It is authored by women with different financial backgrounds, dedicated to encouraging empowerment through financial literacy.
The coronavirus pandemic has led to tough times for many small businesses, but female business owners may be experiencing even more intense ramifications.
“Economists I talk to see this [economic downturn] as a natural disaster. Many jobs will be temporarily suspended but are likely to recover faster than if this were a recession due to a business cycle,” says Samantha Saperstein, head of the Women on the Move program at JP Morgan Chase.Though businesses in general might bounce back quicker, she warns that women-run businesses might have a tougher time.
See related: How the coronavirus pandemic could impact women
Additional caregiving responsibilities
Women are more likely than men to be primary caregivers – a juggle in normal times. But with schools closed and fewer available resources due to the pandemic, taking care of the family is largely falling on women.
“In addition to every other job women had before this, many are now teaching their kids, cooking, doing all the shopping and cleaning,” says Saperstein. “We can’t underestimate the impact that has on their ability to work and get ahead.”
During a May virtual event with Amy Nelson, CEO of women’s coworking space The Riveter, and Hayden Brown, CEO of UpWork, the two discussed the struggle women are facing during the pandemic with additional family responsibilities.
See related: Why it’s OK to put yourself first
Nelson pointed to a 2016 study that found the single most important factor for increasing the number of women in top management positions in countries around the world was mandatory paternity leave, inviting men into the childcare equation from day one.
“It’s interesting that the government is talking about how to revive the economy and infrastructure,” Nelson says. “But they’re not talking about child care or caregiving as part of the infrastructure. That should be a huge priority in getting America back to work.”
Saperstein echoes this concern.
“We’re seeing anecdotal evidence that women are feeling overwhelmed by all they have to do right now,” she says. “I’m concerned we will lose progress for women if they step back. I want to encourage them not to.”
See related: How coronavirus is changing the future of child care
Lack of access to capital
Women are far more likely than men to bootstrap their businesses, while men are “much more likely to take out a business loan,” says Saperstein.
When women-owned businesses do apply for and receive a loan, they amount to 31% less on average than male-owned businesses, according to a 2018 study. While the evidence is anecdotal, this trend of receiving lower funding might extend to federal relief dollars, too.
Paycheck Protection Program (PPP) loans are providing crucial funds for many small businesses trying to stay afloat right now. Yet many small businesses were frustrated in their first attempt to get a PPP loan, exacerbated by news that large, publicly-traded companies were receiving millions of dollars during the first round of loans issued.
A May 8 report by the Small Business Association (SBA) concluded that since it “did not provide guidance to lenders about prioritizing borrowers in underserved and rural markets, these borrowers, including rural, minority and women-owned businesses, may not have received the loans as intended.”
Despite this, Elizabeth (Liz) Sara, owner of marketing and president of the National Women’s Business Council (NWBC), is more optimistic for the second round that went through on May 8.
“Something like $1.8 million in loans have been given out for amounts of $50,000 or under,” says Sara. “From what we know about the nature of these businesses, we can project and assume a lot of those smaller loans did go to women-owned businesses.”
However, gender information is not requested on the application, so “we have no way of knowing” for sure, she concludes.
See related: Making it as a female entrepreneur
In 2019, there were 11.7 million women-owned businesses in the U.S., a 21% increase over five years, according to a report by American Express. While this has shown promising signs for women, 90% of women-run businesses in the U.S. are one-person firms, according to Sara.
Unfortunately, access to PPP loans might depend on the size of your business. At the outset of the program, businesses with fewer employees and less revenue were “unlikely to qualify for larger loans … that would make them a priority for lenders,” according to a report by the Center for Responsible Lending.
“It’s the yoga instructors, nail salons, stylists, dog walkers, copywriters, photographers, event planners I’m worried about,” says Sara. “Those services are hard to track and so is their potential for surviving this pandemic.”
Another factor: Many women-run businesses are in industries most vulnerable to the pandemic-related shutdown. By 2019, nearly 3 million women in the country were running in-person, service-oriented businesses, such as hair and pet-care salons, according to that same American Express report.
These high-touch services were some of the first businesses to shut down across the country, and they will likely be some of the last to reopen, at least at full capacity.
What business owners can do
Even if your business hasn’t taken a hit in the pandemic, now is a great time to evaluate it and work to mitigate risk. Here are some ways you can protect your business now and in the future.
Build a team and delegate
Now is the time to tap all your available resources.
“Don’t try to do everything yourself,” Saperstein says. “This is the time to pull in your team – certainly your employees … but also your financial advisor, your accountant [and] board of directors.”
One key player she suggests adding to your support network: a banker. She encourages developing relationships with a bank so you can lean on them in good times, as well as bad.
“Women who didn’t have business relationships with a bank had a very hard time pursing PPP funding in that first round,” says Saperstein.
Know the resources available to you
Even if your business is just beginning to feel the financial blowback of the shutdown, consider applying for federal and state assistance. Your accountant or financial adviser can help you decide which resource is best.
In light of the pandemic, freelancers and other sole proprietor businesses can now receive unemployment benefits through their states and the federal government. You can file through your state’s unemployment agency.
Despite the difficulties some small businesses have had getting a PPP loan, it’s still worth applying for it. A forgivable loan, it can provide your business with necessary funds to cover payroll, rent and other qualified expenses.
If you are in an agricultural business, you can qualify for an Emergency Injury Disaster (EID) Loan, also a forgivable loan through the SBA. This can cover payroll, fixed debt and other qualified expenses.
Originally, EID Loans were available to more industries. But as of May, only applications by agricultural businesses are being accepted.
Federal contracting program loan
The SBA has a variety of programs to help small businesses become a contract supplier for the federal government. Currently, the federal government aims to award at least 5% of all federal contracting dollars to women-owned small businesses. Businesses can begin applying for 2020 contracts on July 15.
Build your business credit
According to an Experian report, female business owners report slightly lower business credit scores (one point, on average) compared to men. This is fairly consistent to data on consumer credit scores.
A strong consumer credit score is a great starting point to building strong business credit. But if your score is less than ideal, there are some ways you can build business credit without using your personal score.
Either way, building strong business credit is essential to accessing the funds your business might need, especially when the economy is struggling and lenders are more stringent with loan approvals.
“I encourage women not to fear credit,” says Saperstein. “Work on building your credit. Understand the capital tools that are available to you, so you can … be better positioned next time there’s a downturn.”
We’re in an unprecedented time of economic crisis, with many businesses losing significant revenue overnight. But you have some options. Gather a trusted team and make a plan for how to best weather this crisis. Then once things are a little more stable, think about what you can do to help your business mitigate any future risk.