Securing finance - the next glass ceiling

Jul 18 2005 by Nic Paton Print This Article

The boardroom glass ceiling may finally be starting to crack, but for women who want to get on in business it is becoming increasingly clear there is another significant gender imbalance to be tackled – finance.

This week news emerged of a £30 million investment fund that has been launched to bridge the funding gap for female entrepreneurs in Britain, who often face obstacles raising money through traditional channels.

The fund, developed by StarGate Capital Management, is called Trapezia and offers women-led firms financial capital, access to new markets and business mentoring.

Its launch comes as evidence is growing of "institutionalised bias" against female-owned businesses by banks, particularly in Britain.

A study by Warwick Business School, but commissioned by the Bank of England, in May concluded that banks typically charged female-owned businesses one percentage point more in interest on business loans.

Evidence is growing of "institutionalised bias" against female-owned businesses by banks

And a study in March for the Paris-based Forum for Women Entrepreneurs & Executives reported that venture capitalists in Europe were shunning investments in companies run by women.

In 2004 there were no more venture capital-backed female-run businesses in Europe than there were in 2000, and even then it was a measly 3.3 per cent, the Women in Management survey discovered.

Such firms also received less than 2.5 per cent of the total venture-capital investment in Europe — which was €3.5 billion in 2004, the research found.

The two studies came on the back of similar research two years ago by the lifestyle website handbag.com that found half of the women it polled felt a lack of funding was stopping them from running their own businesses.

More than a third complained they did not receive the same business opportunities as their male counterparts. So what's going wrong? Is it institutionalised bias, a glass ceiling, women self-selecting out because they feel there's no point going to male-dominated banks or simply a mammoth misunderstanding?

Durham business school tutor Dinah Bennett, who is also director of the region's Women into the Network body, argues that, in many cases, it is simply entrenched attitudes and a misunderstanding of the needs of women entrepreneurs.

"Women entrepreneurs are often seen as hobbyists or dabblers. It may also be harder for them when it comes to credit scoring if they have taken time out to raise children or for elder care," she says.

She recounts one example of a woman who went to a bank for funding and was disdainfully turned down, only for the banker to tell her husband all about it when they next met at the local Rotary Club.

"That was a severe breach of confidence because he had no idea why she was setting up a business – it could have been to enable her to leave him – and it would never have happened if she had been a man," she adds.

But things are slowly changing, particularly among younger bankers and financiers, suggests Bennett, who recently won the Queen's Award for Enterprise Promotion.

Ensuring there are more women making funding decisions may help, but segmenting women should not be seen as a panacea for the problem, she adds.

Some women entrepreneurs, for instance, may in fact feel more comfortable negotiating for funding with a man.

The problem is often less that women are unable to get funding and more, as the Warwick research showed, that when they do get it they are forced to pay more because of out-dated perceptions about risk, argues David Bishop of the Federation of Small Businesses.

"Banks do often perceive women entrepreneurs as being of higher risk. They often look at them on paper and argue that they have less assets than their male counterparts," he says.

What is needed therefore is a conscious effort by the banks to change their culture and perceptions, he suggests.

"We would like to see the culture changing within the whole banking industry, perhaps by bringing in more employees from the business world," he adds.

Entrepreneur Jacqueline de Baer agrees there are cultural and gender issues that need to be addressed.

De Baer, founder of clothing company de Baer and a member of the Academy of Chief Executives, argues working environments are becoming more "feminised" as things such as soft skills, mentoring, coaching and so on become more important.

This is helping to break down the traditional management glass ceiling, although there is of course still some way to go.

But when it comes to accessing finance it can be a very different story for women entrepreneurs.

"Some of the banks still have a fairly old-fashioned culture and still male driven," she says.