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Overcoming Financial Challenges for Women Business Owners
by Rieva Lesonsky
March 15, 2022
Female Small Business Owner Working on Finances

Unfortunately, 2021 was not a good year for women business owners, according to the just-released annual Biz2Credit Women-Owned Business Study. Profits for entrepreneurial women decreased 26 percent in 2021 from 2020, and average yearly revenues dropped 4 percent. 

Increases in operating costs were the main reason profits fell last year. Rohit Arora, CEO of Biz2Credit, says, "The cost of doing business rose significantly in 2021, particularly labor costs, fuel costs, raw materials, and inventory prices, which skyrocketed because of supply chain disruption. These economic pressures hurt women-owned firms especially hard."

Women-owned businesses made an average profit of $88,995 in 2021. Not only was this far less than 2020's average profit of $119,654, but it was more than $48,000 less than the average profit earned by businesses owned by men in 2021 ($136,147). 

The women entrepreneurs surveyed had an average credit score of 580, compared to male business owners with an average score of 594.

Other key findings from the study examined several financial indicators, including annual revenue, operating expenses, age of business, and credit scores of loan applicants. Key findings:

  • Average Annual Revenue dropped from $493,401 in 2020 to $475,707 in 2021
  • Average Expenses increased from $373,748 in 2020 to $386,712 in 2021
  • Services were the top industry, representing 31.9% of the women-owned companies

Arora says, "While 2021 was a tough year for many businesses due to repeated shutdowns and other restrictions on small business, the extent of the drop [for women-owned companies] was surprising to me." But, he explains, "During any downturn, women-owned businesses suffer more as they tend to be smaller and have less access to formal capital sources, such as banks, as our yearly studies have shown." 

Comparing businesses owned by men and women that use Biz2Credit, the study found a significant revenue gap between the two. Specifically: 

  • Women-to-Men Borrowing Ratio: 33% female vs. 67% male business loan applications
  • The Average Loan Size for women-owned businesses ($49,712) was 41% lower than the average loan size for businesses owned by men ($83,198) in 2020.
  • Average Annual Revenue: Women-owned businesses ($475,707) earned $199,936 less on average than male-owned firms ($675,643) in 2021.
  • Paycheck Protection Program (PPP): While almost half (49%) of the applicants on the Biz2Credit platform for round two of the PPP loans were women-owned businesses, these companies were approved for an average of $23,101, compared to the average $36,348 PPP loan for businesses owned by men. 

Looking on the bright side, Arora says, "One of the reasons average annual revenue for women-owned businesses declined is because women began starting new businesses at a higher rate during the pandemic." 

In other news for America's women business owners, SBA Administrator Isabella Casillas Guzman recently announced the SBA's plans to elevate the Office of Women's Business Ownership (OWBO) to report to the Office of the Administrator directly.

In her recent announcement, Administrator Guzman noted that women entrepreneurs "have become the fastest-growing and one of the most impactful segments of the business community. And while there has been historic progress in women's entrepreneurship, significant disparities persist, impacting women entrepreneurs access to resources and opportunity, especially in the face of the economic challenges posed by COVID. That is why I am proud to advance the mission of the Office of Women's Business Ownership and reaffirm our commitment to America's women-owned small businesses."

Although the reorganization is still in the planning stages, Natalie Madeira Cofield, the Assistant Administrator, Office of Women's Business Ownership, U.S. Small Business Administration, who currently leads the OWBO, will continue to do so.

Women first took the lead in starting businesses in the 1990s. According to data from the SBA's Office of Advocacy between 2014 and 2016, the number of employer firms owned by women grew 6%, twice the growth rate of employer firms owned by men. The primary driver of this substantial growth was an increase in the number of employer businesses owned by minority women, which grew 14% in that time.

And despite the downturn in 2021 reported by Biz2Credit, women-owned businesses are still making an impact. According to the latest stats we have (the COVID-19 pandemic delayed reporting) from the American Express State of Women-Owned Businesses Report (2019), women in the U.S. are starting and growing businesses at a record pace. These stats show that women own about 13 million businesses in America, employ more than 9 million people, and generate $1.9 trillion in annual revenues.

No doubt these are challenging times for all small business owners, and since women, as Arora said, typically own smaller and new companies, they are particularly impacted. If you're a woman business owner and need help, a SCORE mentor can help. You can find one here. And check out SCORE's resources for women business owners

About the author
Rieva Lesonsky
Rieva Lesonsky is president and CEO of GrowBiz Media, a custom content and media company focusing on small business and entrepreneurship, and the blog
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