Women-Owned businesses and access to bank credit: Evidence from three surveys since 1987

Women-owned businesses are often thought to face difficulties in applying for and securing bank loans (Schwartz, 1979 Schwartz, E. B. 1979. Entrepreneurship: a new female frontier. Journal of Contemporary Business, 4: 47–76. [Google Scholar]; Riding and Swift, 1990 Riding, A. and Swift, C. 1990. Women business owners and terms of credit: some empirical findings of the Canadian experience. Journal of Business Venturing, 5(5): 327–340. [Crossref], [Web of Science ®] , [Google Scholar]; Buttner and Rosen, 1992 Buttner, E. H. and Rosen, B. 1992. Rejection in the loan application process: male and female entrepreneurs' perceptions and subsequent intentions. Journal of Small Business Management, 30(1): 58–65. [Google Scholar]; Fabowale et al., 1995 Fabowale, L., Orser, B. and Riding, A. 1995. Gender, structural factors, and credit terms between Canadian small businesses and financial institutions. Entrepreneurship Theory and Practice, 19(4): 41–65. [Crossref] , [Google Scholar]; Haines et al., 1999 Haines, G. H. Jr, Orser, B. J. and Riding, A. L. 1999. Myths and realities: an empirical study of banks and the gender of small business clients. Canadian Journal of Administrative Sciences, 16(4): 291–307. [Crossref], [Web of Science ®] , [Google Scholar]; Coleman, 2000 Coleman, S. 2000. Access to capital and terms of credit: a comparison of men- and women-owned small businesses. Journal of Small Business Management, 38(3): 37–52. [Web of Science ®] , [Google Scholar]). While there may always be individual instances of difficulties with credit availability that might receive the attention of the media, the more important issue—especially given the increasing contribution of women-owned business to growth in the US economy, is whether women-owned businesses face any systemic, non-economic discrimination in applying for credit. We test three questions related to the success of women-owned businesses in accessing commercial bank financing. First, are women-owned businesses less likely to apply for bank loans than businesses owned by men? Second are women-owned businesses more likely to be turned down in their most recent loan application? And finally, if approved on their most recent loan application, are they more likely to receive a smaller loan? We found gender to be related to the application for bank loans as well as the size of the loans but not to the frequency of turndowns. These findings may be due to an omitted variable that could capture women's concerns about maintaining control over their business.