Some Banks Still Shy From Loans To Women
With 8 million American women owning businesses that employ about 18.5 million people, you’d think women wouldn’t need a helping hand when applying for a bank loan.
But with the recent nationwide expansion of the Small Business Administration program to prequalify women seeking loans, it appears that women are still considered second-class citizens by many in the banking world.
“Some banks care an awful lot about the women’s market,” said Sherrye Henry, assistant administrator of the SBA’s office of Women’s Business Ownership. “But there are banks that turn their backs.”
Henry and SBA chief Aida Alvarez were in New York City recently to announce the expansion of the women’s prequalification program nationwide. The program, which was launched as an experiment in 1994, has handled 614 loans totalling $63 million. It was tested at 16 sites including San Francisco, Boston, Helena, Denver and Augusta, Maine.
The program works like this: The SBA directs women business owners to a nonprofit group that helps them write or polish up their business plan and fill out a loan application. The completed application package is presented to the SBA. If it looks good, the SBA issues a letter stating the applicant qualifies for a government loan guarantee. Letter in hand, the business owner goes to a commercial lender to apply for a loan of up to $250,000. “The SBA’s stamp of approval helps women get what they need,” said Alvarez. She said initiatives like the prequalification program not only help fuel business growth but “help change lives and keep families secure.”
To its credit, with President Clinton’s support, the SBA has worked hard over the past four years to put more bank loans in women’s hands. In fiscal 1992, the SBA guaranteed 3,377 loans to women-owned businesses; in fiscal 1996, the number increased to 10,459. But day to day, women around the country are still having a tough time getting bank financing.
“The banks don’t really know what to make of us, so it’s a form of discrimination,” said Susan Sonkin, founder of the Westchester Center for Educational and Emotional Development in Hartsdale, N.Y.
Sonkin is working on her business plan and hopes to be prequalified by the SBA for a $200,000 loan to expand her center, which provides various kinds of therapy to 175 children a week. She has 15 full- and part-time employees working for the company, which she founded in 1983.
She said she’s wary of applying for a business loan because a few years ago, after a divorce, she had a tough time obtaining a mortgage on her own. With a friend’s help, she finally found a bank willing to refinance her house. She welcomes the SBA’s helping hand. “I predict this SBA program will be a transitional one,” she said. “When the banks are forced to look at us more closely, they’ll be prepared to deal with us directly.”
Fortunately, two of the nation’s largest banks are embracing women business owners by aligning themselves with major women’s business organizations.
San Francisco-based Wells Fargo Bank has teamed up with the National Association of Women Business Owners, a Washington, D.C.-based group with 60 chapters, while Bank of America recently linked up with Women Inc., a Sacramento-based trade association.
Both giants have committed billions to the women’s market. Wells Fargo led the way in 1995 with a $1 billion lending pledge, which was increased to $10 billion over a 10-year period when the first $1 billion was lent out in a year.
Wells Fargo’s loans are unsecured and require a one-page application form with no tax returns or financial statements. The minimum loan amount is $5,000. To qualify for a loan, women must have good personal and business credit, have been in business for two years, and be profitable. For more information, call 1-888-767-2444.
Bank of America recently jumped into the market with its own lending program targeted toward women. B of A has joined forces with Sacramento-based Women Inc., an association which provides a variety of services and discounts to members.
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