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Women across England feel
they are being left out in the cold by banks and other funding institutions in
the bid to start their own business. Research conducted by the FDA at a series
of road shows across the country revealed that the majority of female entrepreneurs
agree it is harder for women to get access to funding than men.
The FDA, which is the UK association for the invoice finance industry, surveyed women from the East Midlands, London and Yorkshire and found they were united in the challenges they faced in pursuing their dream of owning a business. The top three barriers to starting a business cited by survey respondents were lack of funding; no time and; family commitments. While lack of funding was the biggest barrier, regional variations occurred in the East Midlands where family commitments posed a problem, and in London where women indicated inadequate advice as being an obstacle.
The research found that all women were motivated to start their own business by the prospect of being their own boss, followed by flexible working and financial rewards. The majority intended to start their own business within the next 12 months with 31 per cent of London women being particularly entrepreneurial and wanting to achieve their goal within three months.
Interestingly, the major difference that emerged across the regions was the source of financial advice, the criteria they use when choosing their financial providers and how often they seek advice. Women from the East Midlands seek advice from professional advisors such as accountants and bank managers, while Londoners and Yorkshire women head to public sector bodies such as Business link and the Small Business Service for guidance.
Criteria for choosing a financial provider showed that East Midlands and London female entrepreneurs look for advisors that understand their business, while Yorkshire females look at the costs involved when appointing their financial provider. Women in London and the East Midlands are more likely to meet or speak to their financial adviser on a monthly basis whereas Yorkshire women consult their advisers every six months.
All respondents agreed that financial advisers could enhance their service by offering information on different types of funding, followed by more access to impartial advice and market research. The only difference was in London where women placed greater weighting on the provision of market research than impartial advice.
Commenting on the findings Kate Sharp, CEO said: "The results show there is a nationwide problem when it comes to women knowing how to gain access to and how to generate finance to fund their business start-ups. Financial service providers need to work harder at making women aware of the range of products available for initial start-up and on-going growth. Increased awareness and education will help overcome the perception of a funding gap and ultimately aid the health of entrepreneurship in this country.
"This is the reason we have teamed up with the women's access to finance road show, which focuses on raising greater financial awareness, particularly on the different types and sources of business finance available and provides direct help and advice to women entrepreneurs with finding the appropriate finance for their businesses.
Margaret Hodge, Minister for Industry and the Regions said: "We clearly need to unravel why women believe that access to finance is a barrier to starting their own businesses. If women think they can't get the money they need to start a new business, Britain will lose out on the huge benefits we could all enjoy from more new business start-ups. If women in the UK started as many businesses as women in America currently do, we'd have at least 700,000 more businesses in the UK.
"Increasing the financial awareness of women entrepreneurs has been our key priority. We want to do all we can to encourage more women to set up their own business and together with the Women's Stakeholder Group and Regional Development Agencies we have run a series of regional roadshows. These have helped to raise awareness of the different types and sources of finance available, to help women start and grow their businesses."
The research also examined the demographic characteristics of female entrepreneurs across the country, revealing that women who intend to start their own business are mostly likely to be aged between 40 and 50 in London and Yorkshire, while in the East Midlands they are generally aged between 30 and 40. Additionally, on average two-thirds of women who want to run their own company have children.
The survey was conducted as part of the FDA's tenth anniversary. The invoice finance industry is now worth more than £148 billion, a growth of 460 per cent since 1995. Last year around 43,000 businesses in the UK were advanced over £11 billion by FDA members, with SMEs accounting for 99 per cent of clients using invoice finance.
Tips from Kate Sharp, Chief Executive Officer of the FDA
1. Always have a business plan, if you are not clear about what you are doing and where you are going others will not be inspired to invest in you.
2. Don't be worried about seeking the advice of others when putting your business plan together. Speak to people who have established businesses themselves, seek advice from the relevant agencies about the best way to construct and lay out your plan. Time invested at this stage will reap dividends later.
3. Make sure you have considered all of your financial requirements. An under-funded business is a guaranteed route to failure.
4. Make your trading figures prudent. Financiers are not impressed by over rapid growth projections and unrealistic profit margins. They need to believe that your projections are achievable and sustainable.
5. Make sure your business plans clearly demonstrates how you will pay your financier back, if they cannot how they will recover their investment they simply will not invest.
6. Think carefully about your financial needs in terms of the most suitable means of obtaining funding. There are many different types of funding out there besides the obvious loan or overdraft, from venture capital investments, mortgages for property, leasing for plant and machinery and invoice finance for cashflow. Seek the most appropriate type of funding for your needs.
7. Be prepared to make a personal commitment to your business. You cannot expect others to invest in your business if you are not prepared to invest in it yourself. Financiers and investors will want to see a personal commitment before they invest their money.
8. Have reasonable expectations, most financiers will look for some form of security if they are to advance funds to you. Don't expect to borrow more than the value of your security.
9. Don't just approach one financier, try a number and compare the offers you are made before accepting the one that is best for your business and always read the small print on the contracts.
10. Make sure your figures include the cost of finance, if you are only making a profit for your financier and not yourself and your business it's simply not worth it.