Biz2Credit announced on Thursday that it has release a new study that revealed the average annual revenues and loan approval percentages of women-owned companies increased significantly last year. The online credit marketplace analyzed more than 35,000 applications from business owners on its platform during 2015.
According to the report, the 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.
Rohit Arora, CEO of Biz2Credit and who oversaw the research, stated:
“Despite the increased profitability that we have seen in women-owned businesses over the last year, our analysis has confirmed that a gender gap does still exist. While there is still a substantial difference, women entrepreneurs should be encouraged because this gap is narrowing.”
The study also confirmed that average credit scores for women-owned companies remained stagnant 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. Arora commented:
“Favorable economic conditions in 2015 resulted in good credit scores overall, on average, for both men- and women-owned businesses. A credit score of at least 600 points is the benchmark of where entrepreneurs should want to be, especially if they are in the market for funding. Many banks will not even consider your loan request if your credit score is not on par with their standards, and this can lead borrowers to pricier loan alternatives.”
It was then 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. Arora explained:
“Improved economic conditions and historically low interested rates have created an atmosphere perfect for entrepreneurship, resulting in an increase of loan requests. When the economy is strong, we notice that more entrepreneurs request funding to expand operations.”
Approval rates for women-owned businesses were 33% lower than for male-owned businesses. One aspect of note is that women’s default rates are higher that of men at 1.25% versus 0.66% respectively, although women entrepreneurs’ performance has improved significantly since 2014. Arora added:
“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, so it isn’t too surprising that loan approval rates for women-owned businesses were lower. However, the wide margin is cause for concern and the SBA, among otherorganizations have implemented initiatives in recent years to help narrow the gap and inspire better financial health.”