New study provides insights into women business owners' financial strategies.

A new study shows that having goals for business growth is the key factor driving women business owners' success in obtaining capital, and that women business owners remain persistent even when they are turned down. Capital Choices: Volume Two, The Value of Knowledge published by the Center for Women's Business Research and underwritten by Wells Fargo, compares the practices of women business owners who have, and have not, obtained all forms of credit including business credit, business bank loans and equity capital.

"Ten years ago, in a landmark study also sponsored by Wells Fargo, we saw that only 50% of women business owners expressed satisfaction with their experiences in seeking credit. In this new study, that percent has exploded to over 70%," said Marjorie Alfus, chair, Center for Women's Business Research. "Furthermore, today, more than one-half of all women business owners have a business line of credit (57%) and 41% have business bank loans."

A desire to grow their business, rather than industry, size or age of the business was the determining factor in their decision to seek capital or credit, according to the women surveyed. The study shows that 42% of women business owners who obtained business lines of credit and 43% who obtained business bank loans wanted their businesses to be as large as

This is compared to 29% and 32% respectively of women who had not obtained either of these sources of capital.

As in making other business decisions, women business owners seek advice from a range of sources to get the information they need to pursue capital. Two-thirds (66%) of the women business owners rely on external accountants or financial specialists for advice about financing for their businesses. Slightly more than one-half (51%) rely on company accountants or financial officers and half (50%) rely on investors for advice.

Getting financial advice from external or internal experts pays off for women business owners. The study found that those who rely upon bankers are more likely to have obtained a business line of credit (73% vs. 46%) or a business bank loan (59% vs. 28%) compared to those who do not rely upon bankers as heavily. The same is true of those women who rely on their boards of directors, company accountants or financial officers, or external accountants or financial specialists.

"As women business owners continue to grow at an unprecedented rate, it is important that we continue to understand and examine the unique factors behind their growth, " said Joy Ott, regional president for Wells Fargo Bank in Montana and national spokesperson for Wells Fargo's Women's Business Services program. "While tremendous progress has been made, this study clearly indicates that financial institutions need to remain unwavering in their support of women business owners to ensure the continued success of this dynamic market."

Women business owners are persistent in their pursuit of credit or equity. When turned down by one source when seeking business lines of credit, over half (58%) approached a different lender or lenders. Those seeking equity were as likely to be persistent--57% approached other sources after being turned down. In addition, women business owners made changes in their business reports--producing more financial statements or creating or modifying their business plans--to make their companies more attractive to lenders.

For those who did not seek bank loans or lines of credit as a source of capital, the top reasons were: preferring not to carry debt; not having adequate cash flow to support repayment; believing their company did not qualify for this type of financing; not wanting to risk family or personal assets or financial status.

The study also shows that many women business owners are not taking advantage of the full range of credit products that are available. For example, 74% never considered selling or pledging accounts receivable, 55% never considered unsecured personal loans, and 42% never considered vendor credit as sources of capital.

"This may be due to a lack of knowledge about how to use these products or how to obtain them as well as a preference for avoiding debt," said Marjorie Alfus. "If we are to ensure that women-owned enterprises achieve their full economic potential, we must expand the financial coaching and training for all women business owners."

Seven percent of the women business owners in this study obtained equity capital, a relatively rare source of financing for both women- and men-owned businesses.

Capital Choices: Volume Two, The Value of Knowledge is part II of an earlier report released in September 2005 titled Capital Sources: Volume One, What Matters and What Works, released in September 2005. Part III of this research study will be released in the next several months.

Information for this article was provided by the Center for Women's Business Research. For more information, please send an email to [e-mail].

Strategies for Obtaining
Business Lines of Credit
                                     Percent (%)

Sought different lender(s)              58
Produced more financial statements      29
Used a different financial source       29
Sought less funding                     24
Changed business plan                   17
Created business plan                   15
Obtained certification as WOB           12
Secured more assets                     10
Sought larger amounts of funding         9
Improved financials                      4

Base: Women business owners who obtained a business line of credit
but not in their first time attempt -Multiple responses allowed

Source: Capital Choices Volume 2: Value of Knowledge, 2006.

Note: Table made from bar graph.

Sources of Capital Successfully Obtained

                          Percent(%)

Business credit cards        68
Business lines of credit     57
Personal credit cards        53
loans secured with           50
  personal assets
Vendor credit                48
Business bank loans          41
Friends/Family               33
Unsecured personal loans     22
Selling/pledging             12
  accounts receivable
Equity financing              7

Source: Capital Choices Volume 2 Value of knowledge, 2006

Note: Table made from bar graph.

Strategies for Obtaining
Business Bank Loans

                                     Percent(%)
Sought different lender(s)              58
Produced more financial statements      35
Used a different financial source       33
Changed business plan                   23
Created business plan                   18
Sought less funding                     16
Secured more assets                     15
Obtained certification as WOB            8
Sought larger amounts of funding         2
Improved financials                      2

Source: Capital Choices Volume 2 Value of knowledge, 2006