Study of 15,000 Companies Finds Average Revenues of Women-Owned Businesses Increased Nearly 40% in a Year-to-Year Comparison. Analysis shows that a gender-gap still exists, despite the increased profitability that we are seeing with women-owned business in recent years.
Average annual revenues and loan approval percentages of women-owned companies increased significantly in 2014, according to Biz2Credit.com, the leading online credit marketplace, which analyzed more than 15,000 applications from business owners on its platform during the last year. Average annual revenues of women-owned business jumped to $127,222 in 2014, up from $91,488 in 2013 and nearly 40% higher in a year-to-year comparison. Meanwhile, average earnings rose to $67,950 in 2014, up from $54,114 in 2013. In comparison, businesses owned by men generated about 50% more revenue ($193,268) on average than women-owned businesses. Further, average earnings for male-owned businesses were 55% higher ($105,805) than for companies owned by females.
Our analysis shows that a gender-gap still exists, despite the increased profitability that we are seeing with women-owned business in recent years,” explained Rohit Arora, CEO of Biz2Credit, who oversaw the research. “However, women entrepreneurs should feel a sense of optimism, as the numbers indicate that the gap is narrowing.”
Meanwhile, average credit scores for women-owned companies dropped slightly below 600 in 2014, down from 610 in 2013. Meanwhile, average credit scores were 15 points higher for businesses owned by men (615) in 2014. However, average credit scores male-owned businesses also dropped from 630 to 615.
“More and more business owners are seeking credit because the improved economic conditions, although realistically not everyone is creditworthy. During the good times, more people are involved in the lending mix,” explained Arora, one of the nation’s leading experts in small business finance. “Many banks will not even consider granting a small business loan to companies that have credit scores under 600, so these types of business owners are forced to resort to higher-cost alternatives to funding.”
The Biz2Credit report showed that 36% more women-owned companies sought funding on the Biz2Credit platform in 2014 than in 2013. The average age of women-owned businesses applying for funding in 2014 was 31 months, up from the average age of businesses owned by women (27 months) in 2013.
“These are great signs of the growth in small business confidence,” suggested Arora. “Small businesses do not apply for funding unless they believe they can repay their debts.”
Approval rates for women-owned businesses were 29% lower than for male-owned businesses.
“In 2014, we saw male entrepreneurs return to the credit market after sitting out for a while. Generally, they owned longer established, more creditworthy businesses,” Arora said. “This accounts for much of the difference in approval rates.”
- Average earnings for women-owned businesses rose to $67,950 in 2013 from $54,114 in 2013, an improvement of more than 25%
- 36% more women-owned businesses applied for credit in 2014 than in 2013
- The average credit score for women-owned companies dropped from 610 in 2013 to 600 in 2014
- Retail trade businesses represented 19.85% of the women-owned companies in the study, the largest category of businesses.
Statistics: Women-owned vs. Male-owned Businesses
- Women to Men Ratio: 26% (4,061) vs. 74% (11,480) registrations on Biz2Credit.com in 2014
- Average Annual Revenue for women-owned businesses ($127,222) was $66,045 lower than the annual revenue of male-owned companies ($193,267) in 2014.
- Average Operating Expenses: Women-owned businesses tended to have slightly higher average operating expenses. Expenses were 47% of earnings for women-owned businesses; 45% for male-owned companies
- Average Credit Score: On an average, the credit scores for women-owned businesses (600) were 15 points lower than male-owned companies (615). The difference was 20 points in 2013.
- Average Age of Business (in months): 31 vs. 37 for male-owned companies (the age of businesses applying for loans was lower for women-owned businesses)
Biz2Credit cited the following reasons for the improvement of the fortunes of women entrepreneurs:
- The overall improved economy has made it easier for women-owned businesses to get loans.
- Peer-to-Peer or “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.
- With experience, women-owned businesses have become more competitive, more efficient, and more cost effective than ever before.
- 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.