Why do women find it so hard to secure funding for their business?

Updated: 23 May 2023
Carmel Mulroe
Carmel Mulroe
Business Development Manager

The harsh truth is that despite representing more that half the population, the Global Entrepreneurship Monitor recorded that in 2021 the rate of female entrepreneurial activity in Ireland was just 11.3%. While this placed Ireland third across participating countries in the EU, it is quite a stark figure.

There is clearly a significant opportunity here to support more women-led businesses. Yet, while we spend a lot of time talking about equality as the solution – ensuring equal opportunity – it is actually equity – ensuring equal outcome – that will make the real difference for women in the world of business.

So, what can we do to get more women-owned businesses off the ground? It’s quite simple really. We need to put a more equitable system in place to help them access funding. But if it’s that simple, why is this not happening.

The odds are stacked against us

“No” is sadly a familiar word for women business owners who find it much harder to secure funding for their business. There are several reasons why.

First, we all know that banking has historically been a man’s world, and to a large degree it still is. Even today, across the wider global financial services industry, women are still under-represented. A report from Deloitte in 2021 shows women held just 21% of board seats, 19% of C-suite roles and 5% of CEO positions. The result of this male dominated environment means that female entrepreneurs looking for funding can often end up feeling isolated, and unsure who to trust. In an Irish context, as of December 2021 males held 84% of CEO roles in the financial services sector, according to IBEC.

Secondly, as highlighted by research from LinkedIn, women are more likely than men to have underdeveloped networks meaning women business owners have to work harder to get their foot in the door, and get in front of the right people to grow their venture. Therefore, it can take longer for them to build important relationships and credibility for themselves and their business.

Lastly, we know that women are more likely to face institutional barriers, such as lack of / cost of childcare, entrenched stigmas and discouraging attitudes. These all continue to contribute to harmful gaps in women's confidence, knowledge, opportunities, and achievements.

The OECD’s The Missing Entrepreneurs report serves as a stark reinforcement of this point – women in EU and OECD countries are only 75% as likely as men to believe they have the skills to start a business. In addition, these women are only 60%-70% as likely as men to expect their businesses to create 20 jobs or more over the next five years.

Keep unconscious bias front of mind

Ask anyone in a financial institution if they are more likely to provide funding to a man than a woman, and I would imagine that most will say they aren’t biased in that way. Indeed, the system isn’t meant to be biased. In today’s day and age, banks will have the same criteria for funding applied against men and women – but this doesn’t mean it’s fair.

Equality isn’t enough. And crucially, we must recognise that unconscious biases play a major role in preventing women from accessing the finance they need.

We’ve mentioned the various institutional barriers at play that might prevent a woman from either accessing finance or setting up a business in the first place, but let’s just take childcare as an example. When banks are assessing a business owner’s CV or history, years of “inactivity” owed to childcare all stack negatively against women entrepreneurs. Yet, raising a child does not mean that someone is less capable of running a business, by any means. In fact, I would argue quite the opposite.

That’s why it’s so important to see the human and their reality and social constraints behind the business. We must review our funding policies and criteria to see where women founders might be more likely to face barriers, consider how these could be adapted and finally, but most importantly, take action.

We also need to be wary about biases baked into technology and algorithms. AI and fintech are seen as disrupting competitors, but the reality is that algorithms don’t always make the best or fairest risk-based decisions. They continually see businesses that are complex as too risky – and this disproportionately impacts women founded businesses. And of course, if these algorithms are built by historically biased views, they will be biased themselves.

Hold a mirror up to your organisation

To tackle this unconscious bias, it is so important that we continue the good work that has already begun in making our own finance organisations diverse. Providing effective training and implementing strong role models both serve as ways to further strengthen the diversity of organisations.

By creating a culture built on open and transparent conversation, and by nurturing honesty and humility, this will help to ensure that bias can be recognised and rectified – rather than chastised.

Ultimately, in order to ensure equity of business funding, we need to build a deep understanding of our customers, of their businesses, and the complexities involved so we can make a nuanced decision. While many traditional lenders don’t do this, it’s something we pride ourselves on at Bibby Financial Services in the way we work with our customers.

Fight the good fight

The good news is, we’re on the right path. Recent data from TechIreland found that funding received by women-led Irish start-ups reached a record high of €234 million last year, an increase from €230 million in 2021. This is despite an overall decline in funding for start-ups year-on-year. Positive also, is that Ireland stands out as having the highest proportion of female investment professionals, at 28%, in comparison to the EU average of 10%, according to Level 20’s European Gender Diversity Report 2022.

Women business owners have so much potential to bring new ideas and exciting businesses into the world. So, now, it is more important than ever to make sure that we keep fighting the good fight – recognising both the opportunities and challenges for women-owned businesses, and ensuring that access to finance is not yet another hurdle to be vaulted.