LOANS FOR WOMEN-RUN BUSINESSES A NEW FRONTIER FOR BANK GROWTH.

THE NUMBER OF BUSINESSES OWNED BY FEMALES GROWS

As someone who runs a business that exists to help entrepreneurs, Kim Auclair knows more than most about what it takes to succeed in the marketplace, and the financial services available along the way.

Yet in 2011 when she opened Niviti as a small business support centre and co- working space in Quebec City, she avoided taking out a loan or seeking other external financing.

“I felt discouraged early on to apply for loans and funding programs,” says Auclair, who has so far financed her business through bootstrapping and some family support.

“I would often turn the opportunities down and I realized it was because I wasn’t prepared for these requests. I especially felt that I didn’t have the right information,” she says.

Auclair is one of many women entrepreneurs who are less likely than men to seek loans for their business, even when they qualify for external financing.

Barbara Orser, a professor at the University of Ottawa’s Telfer School of Management, says the numbers clearly show that women apply for fewer loans, though what’s not certain is why they become what she calls “discouraged borrowers.”

“When I speak with groups of women business owners and I throw out the question ‘ Do banks discriminate?’ you’ll always see hands going up. So there’s a perceptual issue there,” she says.

Orser warns that not seeking outside financing can stunt the growth of companies and limit their selection of employees and suppliers.

This can have an impact on the entire Canadian economy, Orser says, as the number of womanowned businesses is growing. Currently 47 per cent of all Canadian businesses are either partially or wholly owned by women, even higher than the U. S. where it’s 30 per cent.

“We have one of the most efficient banking systems in the world,” says Orser. “In my mind, if there’s any nation that could have the most efficient marketplace for women, it’s Canada.”

And of new startups, the number run by women are now outpacing men, particularly in growth areas such as pharmacies, physiotherapy and other professional services.

“The businesses tend to be smaller, but when you aggregate the numbers they’re very impressive,” Orser says. “For banks, I see this as a business opportunity. This is certainly a growing market and it’s a market that all of our evidence suggests has significant economic upside.”

Recently, some financial institutions have caught onto the potential.

In 2015, the Business Development Bank of Canada earmarked $700 million of funding over three years to finance up to 400 additional loads to women-owned businesses.

“Risk- taking is important for entrepreneurial success,” says Lesley Lawrence, BDC’s National Champion for Women Entrepreneurs.

As of the end of November 2015, BDC says it had committed more than $ 150 million to businesses majority-owned by women, representing 22 per cent of the bank’s objective.

The largest dedicated funding comes from Bank of Montreal, which, in 2014, made an additional $ 2 billion in credit available specifically for women entrepreneurs over the next two years.

“We know that women represent a very large, growing and underserved segment both in commercial banking and wealth management, so we really spent some time thinking about how we could address that,” says Susan Brown, BMO’s Senior VP of Women’s Markets and the Alberta and Northwest Territories division.

Brown says that since the creation of the capital fund, somewhere between half and threequarters of the money has been lent out.

She says that while there is a perception that women are “risk averse,” she believes women are actually “risk aware.”

“They tend to spend a lot of time evaluating risk very carefully and planning the ways they can mitigate that risk,” Brown says.

For this reason, Brown believes banks sometimes need to take a different approach to offering services to women business owners that can involve advice and support in addition to the actual funds, which she says is just the “leading edge of the wedge” for larger programs.

“When a woman is looking at her business she’s taking into account all the things that are happening in her life and how her business fits in with her personal situation,” she says. “They want to really understand the risks and mitigate them appropriately so they’re more focused on a relationship- oriented approach when they’re dealing with a bank.”

After doing her own research, Auclair did eventually obtain a line of credit with National Bank of Canada after hiring another employee.

“Financial institutions should, in my opinion, provide more education regarding the ideal time to apply for loans,” she says.

Auclair says she has not yet dipped into the funding, but wants to be prepared for the unexpected now that she is responsible for paying somebody else.

“I’ll use it at the right time,” she says.

FOR BANKS, I SEE THIS AS A BUSINESS OPPORTUNITY.