R e s e a r c h R e p o r t
 

OCTOBER 4, 2000 

ECONOMIC PROSPERITY, 

WOMEN AND ACCESS 

TO CREDIT 

Best Practices in the 

Financial Markets 
ECONOMIC PROSPERITY, WOMEN AND ACCESS TO CREDIT 

Best Practices in the Financial Markets 

The National Women’s Business Council and the Milken Institute are pleased to release this 

research report addressing critical breakthroughs in access to capital. The report examines 

best practices initiated by government, non-profits and financial institutions to address the 

demand for credit from one of the most dynamic new market sectors: women-owned 

business. Essential recommendations gleaned from the lessons learned in implementing 

these programs and policies are included. The report provides our public and private 

institutions with tried and true initiatives that have worked to further the democratization 

of capital, not only for women but for all entrepreneurs seeking to launch or grow 

enterprises in this new economy. 

There is no doubt that women have played a significant role in the unprecedented prosperity 

we have enjoyed during the past decade and continue to anticipate. According to the 

National Foundation for Women Business Owners, from 1987 to 1999, the number of 

women-owned firms increased by 103% nationwide, employment increased by 320%, and 

sales grew by 436%. 

It is clear to us that by implementing these new initiatives, our elected leaders and our 

financial institutions have begun to recognize the strategic importance of investing in new 

markets. Directing our capital wealth – assets that women have been so instrumental in 

generating – back into women-owned businesses is vital to continuing the high rate of 

growth and momentum in our economy. 

This report identifies several innovative programs that have successfully addressed the 

challenges women face in accessing financial resources. Their experience is by no means 

foreign to all businesses, especially new entrants into the marketplace, but the great influx 

of women into the ranks of the entrepreneurial has necessitated a more targeted approach to 

meeting this new demand for capital. Lenders have learned a great deal about addressing 

the capital needs of new markets through their experience in tailoring and marketing their 

lending programs to women. By sharing some of their most successful efforts, it is our hope 

that this report will be more than just food for thought, but rather a blueprint for action to 

help sustain all our new-market enterprises. 

Kay Koplovitz 

Chair, National Women’s Business Council 

CEO, Working Woman Network, Inc. 
ECONOMIC PROSPERITY,
 

WOMEN AND ACCESS
 

TO CREDIT
 

BEST PRACTICES IN THE
 

FINANCIAL MARKETS
 

October 4, 2000
 

By
 

Glenn Yago, Rebecca L. Ford
 

and Judith Gordon
 
Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 National Women’s Business Council 

ACKNOWLEDGMENTS 

We would like to acknowledge and thank the many people who provided 

valuable data and constructive insight to this report. They are Kay Koplovitz, 

Chair, National Women’s Business Council, CEO, Working Woman Network, 

Inc.; Amy Millman, Executive Director, National Women’s Business Council; 

Lynn King, Program Manager, National Women’s Business Council; Linda 

Darragh, Co-President, Women’s Business Development Center; Teri 

Cavanagh, Senior Vice President, FleetBoston Financial, Founder and Director, 

Women Entrepreneurs Connection; Andrea Silbert, Director, Center for 

Women & Enterprise, Inc.; Renee Simms, Senior Vice President, Director 

Strategic Investments, Fleet Development Ventures; Lindsey Johnson 

Suddarth, CEO, Women Incorporated; Sandra Christenson, President, 

Heartland Paper Company; Avis R. Allen, Vice President of Special Projects 

and Lender Relations, National Community Reinvestment Coalition; Gregory 

Dean, Jr., Assistant General Counsel, NASD Regulation, Inc.; Jane Butler, 

Associate Administrator, Office of Financial Assistance, Small Business 

Administration; Kathy Keeley, President, Keeley & Associates; Aaron 

Pankratz, Milken Institute Research Assistant; Liya Brook, Milken Institute 

Research Assistant. 

Copyright © 2000 

For complete ordering information for this and all Milken Institute publications, please see our Web site at www.milkeninstitute.org or contact us by email 

(publications@milkeninstitute.org), telephone (310.998.2600), or in writing. 

Milken Institute 

1250 Fourth Street 

Santa Monica, California 90401-1353 

The National Women’s Business Council was created by Congress to serve as 

an independent source of advice and counsel to the President and Congress on 

issues of importance to women entrepreneurs. The Council has provided the 

women’s business community with a seat at the policy-making table and has 

addressed cutting-edge issues of access to capital and access to markets that 

have posed the greatest challenge to women seeking to launch and grow their 

businesses. Additional information about the NWBC is available at 

www.nwbc.gov. 

The Milken Institute is a 501(c)(3) not-for-profit, nonpartisan, nonideological, 

independent economic think tank founded in 1991. Based in Santa Monica, 

California, the Institute is a resource for economic and public policy research 

and analysis, and a center for advancing discussion about economic, financial, 

social and policy issues. The Institute’s mission is to explore and explain the 

dynamics of world economic performance and growth. The overarching goal is 

to provide an understanding of the effects of economic, political, technological 

and regulatory changes on the world economy and its societies as a basis for a 

better-informed public, more thoughtful public policies, improved economic 

outcomes, and better lives for people. 

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Milken Institute and Economic Prosperity, Women and Access to Credit
 

National Women’s Business Council October 4, 2000
 

TABLE OF CONTENTS 

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
 

REPORT RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
 

Amend Federal Reserve Regulation B of the Equal Credit Opportunity Act . . . . . . . . . . . . . . . . 6
 

Create New Credit Scoring Models. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
 

Implement a National Capital Access Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
 

Exploit Securitization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
 

Institutionalize Economic Census and Related Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
 

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
 

WOMEN BUSINESS OWNERS’ APPROACH TO BUSINESS AND FINANCING. . . . . . . . . . . 11
 

THE SIZE AND SCOPE OF WOMEN-OWNED BUSINESSES. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
 

THE CURRENT LENDING ENVIRONMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
 

FINANCIAL INSTITUTIONS MEETING THE DEMAND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
 

CREATIVE SOLUTIONS: LENDING AND LEARNING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
 

Case Study – Fleet Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
 

WOMEN AND CHANGING DYNAMICS IN FINANCIAL MARKETS. . . . . . . . . . . . . . . . . . . 26
 

Bank Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
 

Liquidity Crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
 

Securitization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
 

Credit Scoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
 

Case Study – Count-Me-In for Women’s Economic Independence . . . . . . . . . . . . . . . . . . . . . . . 29
 

Federal Reserve Regulation B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
 

Loan Reevaluation or “Second Look” Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
 

MICROLENDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
 

Case Study – The Wisconsin Women’s Business Initiative Corporation . . . . . . . . . . . . . . . . . . . 32
 

FEDERAL LENDING AND INVESTMENT PROGRAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
 

Small Business Association Loan Guarantee Programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
 

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Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 National Women’s Business Council
 

Case Study – Community Express. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
 

504 Certified Development Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
 

7(a) Loan Guarantee Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
 

Pre-Qualification Pilot Loan Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
 

SBA Low Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
 

Community Express . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
 

SBA Microloan Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
 

SBA Women’s Business Centers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
 

CDFI: U.S. Treasury Community Development Financial Institutions . . . . . . . . . . . . . . . . . . . . 45
 

SBA Small Business Investment Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
 

Case Study – Capital Across America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
 

OTHER FEDERAL PROGRAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
 

Housing and Urban Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
 

United States Department of Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
 

State Capital Access Programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
 

The Community Reinvestment Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
 

Case Study – Banker’s Community Development Corporation Loan Programs . . . . . . . . . . . . 50
 

REPORT RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
 

Amend Federal Reserve Regulation B of the Equal Credit Opportunity Act . . . . . . . . . . . . . . . 53
 

Create New Credit Scoring Models. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
 

Implement a National Capital Access Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
 

Exploit Securitization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
 

Institutionalize Economic Census and Related Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
 

APPENDIX A: INITIATIVES OF THE WHITE HOUSE AND CONGRESS. . . . . . . . . . . . . . . . . 56
 

APPENDIX B: SUMMARY OF RESEARCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
 

REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
 

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Milken Institute and Economic Prosperity, Women and Access to Credit 

National Women’s Business Council 

EXECUTIVE SUMMARY
 

The position of women in the United States, as citizens and as 

participants in the economy, has changed radically over the last 

century. Recalling that just 100 years ago women did not have the 

right to vote or own property brings the leap that they have made 

from citizens without standing to leadership positions in business 

and government into stunning perspective. 

Today, women participate in the economy in record numbers, both as 

consumers and as business owners. It is no accident that their rise 

coincides with America’s unprecedented economic prosperity. The 

start of this phenomenon began with the entry of women into the 

workforce in the 1970s and is now being propelled through women’s 

business ownership. 

This report examines financing strategies that have successfully 

increased access to capital for women starting or building service, 

technology and other noncollateral-based businesses. It looks at the 

work of alternative funding providers, large and small commercial 

lenders with targeted programs, technical assistance providers and 

government officials, and presents recommendations based on their 

work and other research. The goal of this report is simple: to promote 

capital flow to women-owned firms. It is hoped that this can be 

achieved via the identification of programs that merit replication to 

dramatically expand access to capital and credit for women business 

owners. 

Lending markets play an empirical role in the ability of certain sectors 

to continue growth in a downturn economic cycle. A number of 

innovative recommendations that would channel increased capital 

flow to the smaller growth-oriented businesses are also included in 

this report as small businessses are the first to be affected by the 

slowing of economic activity. By incorporating our recommendations 

into today’s economic policy and establishing the supportive 

i n f r a s t ru c t u re now, these new-economy businesses will have a 

significant advantage in weathering major market adjustments. 

The United States is in the midst of its greatest period of economic 

expansion in over 30 years. The unparalleled impact of women 

business ownership on growth and productivity in our economy is 

evident: 

■ In 1972, women owned less than 5 percent of all businesses, 

October 4, 2000 

Recalling that just 100 

years ago women did 

not have the right to 

vote or own property 

brings the leap that 

they have made from 

citizens without 

standing to leadership 

positions in business 

and government into 

stunning perspective. 

■ ■ ■ 

■ ■ ■ 

This report examines 

financing strategies 

that have successfully 

increased access to 

capital for women 

starting or building 

service, technology 

and other 

noncollateral-based 

businesses. 

The goal of this report 

is simple: to promote 

capital flow to 

women-owned firms. 

1
Economic Prosperity, Women and Access to Credit	 Milken Institute and 

October 4, 2000	 National Women’s Business Council 

In 1972, women 

owned less than 5 

percent of all 

businesses, producing 

less than 1 percent of 

total sales.1 By 1992, 

women-owned 

businesses accounted 

for 34 percent of all 

businesses and 

produced almost 20 

percent of total sales. 

■ ■ ■ 

■ ■ ■ 

Women today own 9.1 

million of the roughly 

24 million small 

businesses in this 

country. These firms 

employ about 52 

percent of the private 

sector workforce and 

generate 51 percent of 

private sector output. 

Women-owned 

businesses provide 

27.5 million jobs to 

the U.S. economy and 

generate over $3.6 

trillion in sales. 

producing less than 1 percent of total sales.1 By 1992, womenowned businesses accounted for 34 percent of all businesses and 

produced almost 20 percent of total sales.2 

■	 Since 1987, the number of women-owned firms has doubled, 

employment has increased four times, and revenues have 

quintupled.3 

■	 Women today own 9.1 million of the roughly 24 million small 

businesses in this country. This represents 38 percent of the small 

businesses operating in the United States.4 These firms employ 

about 52 percent of the private sector workforce and generate 51 

percent of private sector output. 5 

■	 Women-owned businesses provide 27.5 million jobs to the U.S. 

economy and generate over $3.6 trillion in sales. 

■	 Women’s labor force participation surpassed 60 percent in 1998.6 

This broadened business experience has translated into higher rates 

of entre p reneurship and small-business formation critical to 

macroeconomic growth, and is a driving force behind our current 

boom. In the Women’s Business Centers Sustainability Act of 1999 [PL 

106-165, Dec. 9, 1999] Congress noted that in one decade, from 1987 to 

1996, women-owned small businesses grew 171 percent in 

c o n s t ruction, 157 percent in wholesale trade, 140 percent in 

transportation and communications, 130 percent in agriculture and 

112 percent in manufacturing. In light of this unprecedented growth, 

we must take a serious look at what support structures are in place to 

fuel these businesses in all types of economies. 

Recognizing that there is real opportunity for investors in the current 

economy should act as an incentive to open access to credit and 

channel capital to women. While we have witnessed an increased 

flow of money to women entrepreneurs (the SBA has nearly tripled 

both the number and dollar value of loans to women since 1992) it has 

by no means paralleled the growth rate of women-owned businesses 

over the last decade, which are growing faster than the overall 

economy in each of the top 50 metropolitan areas in the United States. 

Capital wealth recently forced financial institutions to reexamine 

their conventional lending models and expand them to new-economy 

businesses – precisely the types of businesses started by women. 

Democratization of capital in the last five years has prodded financial 

institutions into identifying new-markets entre p reneurs and 

embracing them as clients. The result of this market outreach has been 

the advent of repackaged lending programs initiated by banks and 

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Milken Institute and	 Economic Prosperity, Women and Access to Credit 

National Women’s Business Council	 October 4, 2000 

government targeted specifically to the newest entrants into the 

marketplace – women-owned businesses. 

Many of these programs were reworked to address the particular 

needs of women and successfully expanded the lending base to this 

new-market community. Their key elements support increased flow 

of capital to women-owned firms and underscore that capital sources 

are increasingly serving this powerful market segment. Successful 

elements have been identified as: 

■	 Combining financial and managerial or technical assistance to 

maximize the development and success potential of new-markets 

businesses. 

■	 Mitigating risk for financial institutions through appropriate 

new-markets lending policies and procedures. 

■	 Streamlining and expediting loan process and approval 

procedures specifically developed to serve women-owned 

businesses. 

■	 Promoting community-lender partnerships and communitygovernment partnerships. 

While recent studies show that women’s access to credit has 

improved, the fact remains that actual lending is not commensurate 

with the growth of women-owned businesses. Women receive only 12 

percent of all credit provided to small businesses in the U.S. economy 

though they own close to 40 percent of all businesses in the United 

States.7 Of $9.83 billion in SBA-backed loans made to small businesses 

from October 1999 to June 2000, women were awarded only $1.57 

billion.8 This microcosm of the broader lending environment for 

women business owners perpetuates family and friends as a 

dominant source of lending among women. 

The fiscal upside is that heightened awareness of women’s vital 

contribution to the marketplace is effecting fundamental change in 

financial institutions’ lending practices. Lenders and investment 

communities, in conjunction with government, are initiating 

programs across the nation to serve this powerful, yet underserved, 

emerging domestic market. 

Many financial institutions are facing the challenge of reaching these 

new markets by repackaging their financial products to suit womenowned businesses. Among the most noteworthy programs around 

the country that have successfully applied the elements identified 

thereby increasing access to credit for women entrepreneurs are: 

While recent studies 

show that women’s 

access to credit has 

improved, the fact 

remains that actual 

lending is not 

commensurate with 

the growth of womenowned businesses. 

■ ■ ■ 

■ ■ ■ 

Women receive only 

12 percent of all credit 

provided to small 

businesses in the U.S. 

economy though they 

own close to 40 

percent of all 

businesses in the 

United States. 

The fiscal upside is 

that heightened 

awareness of women’s 

vital contribution to 

the marketplace is 

effecting fundamental 

change in financial 

institutions’ lending 

practices. 

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Economic Prosperity, Women and Access to Credit	 Milken Institute and 

October 4, 2000 

FleetBoston’s WEC 

assists startups and 

businesses gain access 

to capital, 

information, advocacy 

and other resources 

and matches womenowned businesses 

with the financing 

best suited to its stage 

in the business cycle. 

■ ■ ■ 

■ ■ ■ 

The WWBIC provides 

access to capital 

combined with high 

quality business 

education, business 

assistance programs, 

one-on-one mentoring 

and other financial 

services. 

Count-Me-In is an 

innovative online 

“lending and 

learning” microloan 

organization 

developing a more 

“woman appropriate” 

credit scoring 

technique. 

National Women’s Business Council 

■	 FleetBoston Financial’s Womens Entrepreneurs’ Connection is a 

small-business-banking program that offers women business 

owners a spectrum of products and services geared for business 

success. The program assists startups and established businesses 

gain access to capital, information, advocacy and other resources. 

By forging strong relationships with specialized financing units 

such as Fleet Community Banking Group and Fleet Development 

Ventures, the program matches women-owned businesses with 

the financing best suited to its stage in the business cycle. 

■	 The Wisconsin Women’s Business Initiative Corporation 

(WWBIC) is a statewide economic development corporation 

certified as a Women’s Business Center, business incubator, 

microlender and Community Development Financial Institution 

(CDFI). It provides access to capital combined with high quality 

business education, business assistance programs, one-on-one 

mentoring and other financial services. 

■	 The Small Business Administration Community Express Loan 

Program, and its partner the National Community Reinvestment 

Coalition (NCRC) with several national banks are part of the 

SBA’s New Markets Initiative to spur economic development 

and job creation in underserved communities through lending to 

small businesses that have difficulty obtaining traditional loans. 

Loans are combined with technical and management assistance 

in budgeting, marketing and management both before and after 

the loan is made. Hands-on training and management support 

are part of each borrower’s loan conditions. 

■	 Count-Me-In For Women’s Economic Independence (Count-MeIn) is an innovative online “lending and learning” microloan 

organization dedicated to strengthening the position of women 

in the economy. This national nonprofit organization provides 

small loans to women who are not qualified, or fear applying, for 

conventional bank loans. The fund addresses systemic challenges 

women face in their dealings with traditional lending institutions 

that do not account for the realities of women’s lives today. In an 

effort to remedy this, Count-Me-In is developing a more 

“woman appropriate” credit scoring technique that will measure 

a woman’s work, personal experience and business development 

potential in evaluating eligibility for small-business loans. 

■	 Capital Across America (CXA) is a mezzanine fund that targets 

women-owned businesses with revenue in excess of $1 million. 

Its objective is to create access to capital for women-owned 

businesses previously ignored by equity investors. 

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Milken Institute and	 Economic Prosperity, Women and Access to Credit 

National Women’s Business Council	 October 4, 2000 

■	 Banker’s Community Development Corporation Loan Program 

(Bankers CDC) is a consortium of San Diego banks that pools 

funds to provide financing to small businesses. Its mission is to 

supply capital to businesses that do not qualify for traditional 

bank financing for business growth so that they may eventually 

qualify for conventional bank financing. Fifty percent of its loans 

are currently made to women business owners. 

The financial world is charged with stimulating business 

development to achieve the rate of business formation necessary to 

sustain growth. Aligning lending institutions with the realities of a 

broader domestic business environment requires breaking down both 

real and perceived barriers to credit and equity investment for 

women, and an end to a one-size-fits-all approach to lending. 

Women’s participation in growing the U.S. economy has contributed 

greatly to the era of prosperity that we are now experiencing. Still 

serious capital gaps between current demand and lending practices 

remain. Failure to adequately capitalize this market puts the nation at 

risk for a slowdown in growth and productivity. Without increased 

access to credit, the danger inherent in inappropriately financing this 

productive segment of our economy is clear. Inequitable lending and 

equity investing in women-owned businesses will have a negative 

impact on our macroeconomy and impede the prospects for 

continued economic growth. Women-owned businesses need capital 

s t ru c t u re that will stimulate this robust market and lessen its 

vulnerability to the “last in, first out” cycle that negatively impacted 

women in the labor market during the last recession. Increased 

investment in this dynamic entrepreneurial sector of our economy is 

vital to continued prosperity. 

Not taking women seriously as creators of wealth is a gre a t 

opportunity lost.9 This reports recommendations and pro g r a m s 

should be viewed as a blueprint for duplicating lending and 

investment initiatives throughout the country that will narrow that 

capital gap and keep this lucrative market on its current course. 

Aligning lending 

institutions with the 

realities of a broader 

domestic business 

environment requires 

breaking down both 

real and perceived 

barriers to credit and 

equity investment for 

women, and an end to 

a one-size-fits-all 

approach to lending. 

■ ■ ■ 

■ ■ ■ 

Women’s participation 

in growing the U.S. 

economy has 

contributed greatly to 

the era of prosperity 

that we are now 

experiencing. Still 

serious capital gaps 

between current 

demand and lending 

practices remain. 

Without increased 

access to credit, the 

danger inherent in 

inappropriately 

financing this 

productive segment of 

our economy is clear. 

5
Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 

Revision of Regulation B would allow 

banks to operate as 

effectively in the 

women’s business 

lending market as 

they have in the home 

mortgage market, 

where collection of 

demographic data has 

opened lending to 

underserved 

communities. 

■ ■ ■ 

■ ■ ■ 

Innovations in credit 

scoring models, 

specifically those that 

incorporate data 

relevant to women 

and women-owned 

businesses, would 

generate new growth 

opportunities. 

As women-owned 

businesses continue 

to strive to gain the 

confidence of lenders, 

CAPs allow banks to 

make loans that 

would not be made 

without the reserve 

insurance pool that 

CAPs provide. 

National Women’s Business Council 

REPORT RECOMMENDATIONS 

AMEND FEDERAL RESERVE REGULATION B – EQUAL 

CREDIT OPPORTUNITY ACT 

Federal Reserve Regulation B is intended to encourage fairness by 

prohibiting lenders from collecting data regarding an applicant’s 

gender or race, among other things. Despite its intent, its effect is to 

mask actual lending practices with regard to women and womenowned businesses. This regulation ought to be amended to allow the 

collection of demographic information from borrowers. This revision 

would allow banks to operate as effectively in the women’s business 

lending market as they have in the home mortgage market, where 

collection of demographic data has opened lending to underserved 

communities. Without specific knowledge of the demographic 

composition of small-business borrowers, including those that apply 

but do not receive approval, the ability to systematically measure and 

monitor programs that advance women’s business ownership 

participation is compromised. 

CREATE NEW CREDIT SCORING MODELS 

Innovations in credit scoring models, specifically those that 

incorporate data relevant to women and women-owned businesses, 

would generate new growth opportunities. Lenders will benefit from 

models that more accurately address lending risks associated with 

women-owned businesses by producing a better understanding of 

their market. The efficacy of this recommendation depends greatly on 

the implementation of the first recommendation, which would make 

gathering the necessary data possible. 

IMPLEMENT A NATIONAL CAPITAL ACCESS PROGRAM 

A National Capital Access Program (CAP) would create a reserve 

insurance pool that will allow banks to make loans that would not 

otherwise be made, thereby creating new financing opportunities for 

thousands of businesses. As women-owned businesses continue to 

strive to gain the confidence of lenders, CAPs allow banks to make 

loans that would not be made without the reserve insurance pool that 

CAPs provide. While women-owned businesses receive only 12 

percent of all credit extended, under the CAP program in California, 

for example, 30 percent of loans go to minority- and women-owned 

businesses.10 

EXPLOIT SECURITIZATION 

Financial institutions could pool standardized small-business loans 

and sell them as securities to institutional investors. This would 

enable banks to increase liquidity, lower transaction costs and thus 

i n c rease their ability to make additional loans. The use of 

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Milken Institute and Economic Prosperity, Women and Access to Credit 

National Women’s Business Council 

securitization in combination with a National Capital Access Program 

(CAP) would encourage a new segment of lenders to specialize in this 

area. The need for specialty lenders, like those currently available for 

auto loans, exists because small-business loans require sophisticated 

personnel and resources to adequately analyze credit-worthiness. 

Securitization serves to increase the availability of funds for lending 

– first, by immediately returning the principal to the lender, and 

second, by releasing the reserve fund in advance of the lender’s 

withdrawal from the program. 

Under current regulations, CAP loan reserves must be held at the 

originating bank until program liquidation. Under securitization, the 

reserves are released when the bonds mature, usually in five to 10 

years from issuance. These additional funds, up to 8 percent of the 

original loan amount, generate a loan dynamic multiplier estimated 

at 23 times. In addition to this large “reserve-release-multiplier” 

effect, the reserves themselves serve to vastly improve the bond 

rating agency’s view of these securities. Under the rating systems in 

use at the major bond rating agencies, the combination of protections 

available would result in investment-grade ratings. The combination 

of high bond ratings at issuance, the multiplier effect of returning 

reserves to the available pool of funds, and the encouragement of 

specialty lenders for under-served small-business borrowers makes 

securitization a vigorous policy tool for encouraging economic 

growth. 

Another risk mitigation innovation that could make investing in the 

emerging women’s market attractive to individual and institutional 

investors is a financial equity guarantee insurance system. The 

reduced downside risk provided by such a system would enable and 

encourage equity investors to fund this emerging market. 

INSTITUTIONALIZE THE ECONOMIC CENSUS, THE SURVEY 

OF WOMEN-OWNED BUSINESS ENTERPRISES, THE SURVEY 

OF MINORITY OWNED BUSINESS ENTERPRISES, THE 

CHARACTERISTICS OF BUSINESS OWNERS SURVEY AND 

THE SURVEY OF SMALL BUSINESS FINANCING. 

Every five years the U. S. Census Bureau conducts the Economic 

Census. This is the only major source of facts about the structure and 

functioning of the nation’s economy. Policymaking agendas of the 

federal government use the data especially in monitoring economic 

activity and providing assistance to businesses. As a part of the 

Economic Census, the Bureau issues its Survey of Minority-Owned 

Business Enterprises (SMOBE), Survey of Women-Owned Business 

Enterprises (SWOBE) and the Characteristics of Business Owners 

Survey (CBO). These surveys provide the only national data on 

selected economic, demographic, and sociological characteristics 

October 4, 2000 

Securitization serves 

to increase the 

availability of funds 

for lending – first, by 

immediately 

returning the 

principal to the lender 

and second, by 

releasing the reserve 

fund in advance of 

the lender’s 

withdrawal from the 

program. 

■ ■ ■ 

■ ■ ■ 

Another risk 

mitigation innovation 

that could make 

investing in the 

emerging women’s 

market attractive to 

individual and 

institutional investors 

is a financial equity 

guarantee insurance 

system. 

The reduced 

downside risk 

provided by such a 

system would enable 

and encourage equity 

investors to fund this 

emerging market. 

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Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 National Women’s Business Council 

Following the release 

of the Economic 

Census and the 

various surveys, the 

Federal Reserve 

conducts its own 

examination of the 

data to more closely 

understand the 

finances of small 

businesses and the 

credit conditions they 

face. 

■ ■ ■ 

Without these 

surveys, federal 

agencies like the SBA 

will not have the 

resources to 

determine the needs 

of the business 

sectors, and 

consequently, 

programs and 

ultimately 

entrepreneurs will 

suffer, placing our 

entire macroeconomy 

at risk. 

among minority, women, non-minority male, and all business owners 

and their businesses. The release this October of the 1997 data will 

mark only the sixth Economic Census that includes women and 

minority enterprises. 

Following the release of the Economic Census and the various 

surveys, the Federal Reserve conducts its own examination (cofunded by the Small Business Administration) of the data to more 

closely understand the finances of small businesses and the credit 

conditions they face. The Federal Reserve has conducted this Survey 

of Small Business Finances (SSBF) following the last three releases of 

the Economic Census. 

While the U.S. Code (Sections 131, 191 and 224) directs the Census 

Bureau to take the Economic Census every five years, funding for 

these valuable programs, including SMOBE, SWOBE and CBO, are at 

the will of our legislators. The U.S. Congress should support these 

very important special census programs and include them when 

considering budget allocations. Without these surveys, federal 

agencies like the SBA will not have the resources to determine the 

needs of the business sectors, and consequently, programs and 

ultimately entre p reneurs will suff e r, placing our entire 

macroeconomy at risk. 

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National Women’s Business Council October 4, 2000 

INTRODUCTION 

The entrance of women into the marketplace has had an 

unparalleled impact on growth and productivity of the U.S. economy. 

Women’s labor force participation revolutionized the work force and 

grew the economy in the 1970s, experiencing its greatest productivity 

growth in history. 

This revolution is continuing now in the form of business ownership. 

Democratization of capital in the 1990s moved women from the 

upper rungs of the corporate ladder into the entre p re n e u r i a l 

marketplace, where they now own close to half of all businesses in the 

United States, taking part in bringing the economy into its greatest 

period of economic expansion in 30 years. 

The Global Entre p reneurship Monitor (GEM) sponsored by the 

Kauffman Center for Entrepreneurial Leadership found a direct 

relationship between a country’s level of entrepreneurial activity and 

its economic growth. Countries with a high number of startups have 

higher economic growth. Its report identified women business 

ownership as a key factor in stimulating and sustaining high levels of 

growth in the economy, stating: “It is clear that a major reason for the 

low startup rates among some countries is the lack of participation by 

women. Countries that wish to increase the level of start-up efforts 

may make major gains by helping women to become more 

involved.”11 

Heightened awareness of women’s vital contribution to the 

marketplace is effecting fundamental change in financial institutions’ 

lending practices. Increased flow of “smart money” into womenowned businesses will catalyze these new entrants in the 

entrepreneurial sector and accelerate productivity as a whole. The 

benefits of investment in this sector flow well beyond reducing 

lending inequities – they extend to our society as a whole. Greater 

financial independence lowers welfare roles and creates greater 

family security and social stability, positively impacting the collective 

well-being of society, and our economy, in turn. 

Women business owners are a critical mass in the work force, 

generating wealth in our economy. The danger inherent in 

inappropriately financing this productive segment of our economy 

raises the specter of “last in, first out” dynamics that negatively 

affected women in the labor market during the last recession. 

The entrance of women 

into the marketplace 

has had an 

unparalleled impact on 

growth and 

productivity of the U.S. 

economy. 

■ ■ ■ 

■ ■ ■ 

Democratization of 

capital in the 1990s 

moved women from 

the upper rungs of the 

corporate ladder into 

the entrepreneurial 

marketplace, where 

they now own close to 

half of all businesses 

in the United States, 

bringing the economy 

into its greatest period 

of economic expansion 

in 30 years. 

The danger inherent in 

inappropriately 

financing this 

productive segment of 

our economy raises the 

specter of “last in, first 

out” dynamics that 

negatively affected 

women in the labor 

market during the last 

recession. 

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Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 

A number of 

distinctive financing 

initiatives have 

sprung up around the 

country, some in 

response to specific 

needs of underserved 

communities, some in 

pursuit of burgeoning 

new markets. 

■ ■ ■ 

■ ■ ■ 

Financial institutions 

are moving away 

from a “one size fits 

all” lending policy, 

and are 

demonstrating a 

willingness to engage 

in creative loan 

packaging that makes 

lending to small 

businesses viable and 

profitable. 

A trend in “lending 

and learning” 

programs is removing 

barriers to capital and 

making smallbusiness lending costeffective. 

National Women’s Business Council 

Recommendations for Growing Women’s Businesses, published by the 

National Women’s Business Council in 1997, agrees. “The growing 

success of women-owned businesses illustrates the opportunity that 

we have to invest in growing women’s businesses. We have much at 

stake and much to gain from identifying and implementing effective 

strategies to invest in women-owned businesses and provide an 

i n f r a s t ru c t u re that will encourage their continued growth and 

development. Initial government programs have pro d u c e d 

remarkable results.”12 

A number of distinctive financing initiatives have sprung up around 

the country, some in response to specific needs of underserved 

communities, some in pursuit of burgeoning new markets. This paper 

describes a selection of programs and lending practices introduced by 

banks, governmental agencies, and public/private initiatives and 

reviews their outstanding characteristics. 

Financial institutions are moving away from a “one size fits all” 

lending policy, and are demonstrating a willingness to engage in 

creative loan packaging that makes lending to small businesses viable 

and profitable. A t rend in “lending and learning” programs is 

removing barriers to capital and making small-business lending costeffective. 

Capital access for women business owners has improved over the 

past decade, due in part to a number of successful financial strategies 

and innovative practices. Still, serious capital gaps remain between 

current demand and lending practices. This brief provides a historical 

overview, points out where gaps continue to exist and provides 

recommendations for closing them. 

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Milken Institute and Economic Prosperity, Women and Access to Credit
 

National Women’s Business Council October 4, 2000
 

WOMEN BUSINESS OWNERS’ 

APPROACH TO BUSINESS AND 

FINANCING 

Firms headed by women provide one out of every four private-sector 

jobs.13 At year-end 1992, women-owned businesses in the U.S. were 

estimated to employ more people than the Fortune 500 companies 

combined.14 It is estimated that women-owned firms will represent 

half of all U.S. small businesses by the year 2005.15 The 1999 “Key 

Facts About Women-Owned Businesses” compiled by the National 

Foundation for Women Business Owners found:16 

■	 As of 1999, there were 9.1 million women-owned businesses in 

the U.S., generating over $3.6 trillion in sales, and employing 

27.5 million workers. 

■	 Since 1987, the number of women-owned firms in the U.S. has 

doubled, employment has increased four-fold, and revenues 

have risen five-fold. 

■	 In the U.S., women-owned firms represent 38 percent of all 

firms. 

■	 While as of 1998, 52 percent of women business owners in the 

U.S. had bank credit, women business owners’ levels of credit 

remain lower than those for male business owners. 

■	 62 percent of Caucasian women business owners have bank 

credit, compared to 50 percent of Hispanic, 45 percent of Asian, 

42 percent of Native American and 38 percent of black women 

business owners. 

■	 Women-owned firms are found across all industries. Womenowned firms that experienced the greatest growth between 1992 

and 1999 were in the construction, wholesale trade, 

transportation, agribusiness and manufacturing industries. 

■	 Notwithstanding lower levels of credit, women-owned 

businesses are as likely to stay in business as the average firm. 

■	 As of 1996, 1 in 8 women-owned firms in the U.S. were owned 

by women of color. The number of minority women-owned 

firms increased by 153 percent between 1987 and 1996 – three 

times faster than the overall business growth rate. 

Firms headed by 

women provide one 

out of every four 

private-sector jobs. 

■ ■ ■ 

■ ■ ■ 

Women-owned firms 

that experienced the 

greatest growth 

between 1992 and 

1999 were in the 

construction, 

wholesale trade, 

transportation, 

agribusiness and 

manufacturing 

industries. 

The number of 

minority womenowned firms 

increased by 153 

percent between 1987 

and 1996 – three times 

faster than the overall 

business growth rate. 

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Economic Prosperity, Women and Access to Credit	 Milken Institute and 

October 4, 2000	 National Women’s Business Council 

A survey of 

professional women 

who left large 

companies to become 

entrepreneurs found 

that women measured 

success in terms of 

self-fulfillment and 

goal achievement. 

■ ■ ■ 

■ ■ ■ 

Women view their 

businesses as 

“cooperative 

networks of 

relationships,” rather 

than separate 

economic units. 

The emphasis placed 

upon relationships by 

women entrepreneurs 

in their business lives 

would seem 

compatible with 

lenders’ long-standing 

practice of using 

relationships to form 

credit decisions 

involving 

informationally 

opaque small 

businesses. 

■	 Women are coming into business ownership with higher levels 

of work experience. Twenty years ago, 11 percent of women who 

started firms had senior management experience. Over the past 

10 years that figure has doubled to 22 percent. 

■	 Women-owned businesses in the U.S. are more likely to be online 

and have a home page for their businesses than businesses 

owned by men. 

A survey of professional women who left large companies to become 

entrepreneurs found that women measured success in terms of selffulfillment and goal achievement and considered these factors more 

important than profits and business growth. Their desire for selfdetermination and balance between work and family played a greater 

role in motivating these women to become entrepreneurs than did 

career advancement in corporate life. 17 

Women entrepreneurs manage the growth of their businesses aimed 

at achieving those goals.18 They “integrate” their businesses into their 

lives, placing high value on relationships. Women view their 

businesses as “cooperative networks of relationships,” rather than 

separate economic units, and use consensus-building approaches to 

decide on policy and practice.19,20 There is also evidence that women 

are more willing to hire a diverse workforce and offer creative 

benefits to employees. Women give higher priority to organizational 

and social efficiency, and emphasize internal communication more 

than their male counterparts. 21 

The emphasis placed upon relationships by women entrepreneurs in 

their business lives would seem compatible with lenders’ longstanding practice of using relationships to form credit decisions 

involving informationally opaque small businesses, i.e. businesses 

that have higher capital costs or simply do not qualify for sufficient 

financing to continue operations.22 “The research using U.S. data 

generally found that small businesses with stronger banking 

relationships received loans with lower rates and fewer collateral 

requirements, had less dependence on trade credit, enjoyed greater 

credit availability, and more protection against the interest rate cycle 

than other small businesses.”23 Yet, relationships between lending 

institutions and women entre p reneurs have traditionally been 

strained, and until recently lenders have tended to overestimate the 

risk involved in lending to women entrepreneurs. To complicate 

matters, the lending process itself has become more centralized and 

automated. 

Although small-business entrepreneurs of both sexes face challenges, 

there are some areas in which women appear to encounter particular 

difficulty. 

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Milken Institute and	 Economic Prosperity, Women and Access to Credit 

National Women’s Business Council 

■	 Women tend to establish small, local, low-collateral enterprises 

in the service and retail sectors and thus have difficulty 

gathering startup capital. 

■	 Women tend to apply for smaller loans of the type considered by 

banks to be money-losers. 

■	 Women are often unaware of the credit sources and information 

networks available to them. 

■	 Occupational segregation has left women entrepreneurs less 

experienced professionally, particularly in management, 

supervision and access to finance.24 

These challenges are being met in a number of ways. SBA programs 

guaranteeing small-business loans objectively eliminate the majority 

of risk that lenders associate with loans to women-owned businesses. 

Programs that create incentives for lenders to provide funding are 

now available. Special marketing programs focus loan officers on the 

particular needs of women business owners and help lenders avoid 

incidents of insensitivity. Programs that provide intensive education 

in business management and technical assistance give even the 

smallest of women business owners management skills as well as 

financing. 

October 4, 2000 

Women tend to 

establish small, local, 

low-collateral 

enterprises in the 

service and retail 

sectors and thus have 

difficulty gathering 

startup capital. 

■ ■ ■ 

■ ■ ■ 

SBA programs 

guaranteeing smallbusiness loans 

objectively eliminate 

the majority of risk 

that lenders associate 

with loans to womenowned businesses. 

Programs that provide 

intensive education in 

business management 

and technical 

assistance give even 

the smallest of 

women business 

owners management 

skills as well as 

financing. 

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Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 

Home-based 

businesses are also 

thriving in the hands 

of women. 

■ ■ ■ 

Women run 3.5 

million home-based 

businesses, providing 

part- and full-time 

employment to almost 

14 million people. 

■ ■ ■ 

More than 60 percent 

of women’s 

businesses were 

home-based 

operations when they 

were first established. 

National Women’s Business Council 

THE SIZE AND SCOPE OF 

WOMEN-OWNED BUSINESSES 

From 1978-1998, women’s labor force participation increased from 

49.6 percent to 60.4 percent.25 The enhanced skill women attained 

from this broadened business experience translated into higher rates 

of entrepreneurship and small-business formation. Women today 

own 9.1 million of the roughly 24 million small businesses in this 

country. This represents 38 percent of the small businesses operating 

in the United States.26 These firms employ about 52 percent of the 

private-sector workforce and generate 51 percent of private-sector 

output.27 Women-owned businesses provide 27.5 million jobs to the 

U.S. economy and generate over $3.6 trillion in sales. 

These numbers are staggering. In 1972, women owned less than 5 

percent of all businesses, producing less than 1 percent of total sales.28 

By 1992, women-owned businesses accounted for 34 percent of all 

businesses and produced almost 20 percent of total sales.29 Since 1987, 

the number of women-owned firms has doubled, employment has 

increased four times, and revenues have quintupled.30 (Table 1) 

Home-based businesses are also thriving in the hands of women. As 

of 1992, women owned nearly 37 percent of home-based firms. 

Women run 3.5 million home-based businesses, providing part- and 

full-time employment to almost 14 million people.31 More than 60 

percent of women’s businesses were home-based operations when 

they were first established.32 

Table 1 

Growth of Women-owned Businesses, 1982-19991 

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National Women’s Business Council 

In 1997, 3.9 million women were primarily self-employed, 

re p resenting 37 percent of all Americans claiming some selfemployment earnings and an increase of 48 percent from 1983.33 The 

number of self-employed men increased just 1.5 percent during that 

same 15 year period. By 2005, about 4.7 million women will be 

primarily self-employed. This will represent an increase of 77 percent 

since 1983, compared with a 6 percent increase in self-employed men 

(Table 2). 

Table 2 

Number of Self Employed Women, 1983-2005 

Year Number As a Percent of Total 

(Thousands) Self Employed 

1983 2,649 29.2% 

1984 2,770 29.7% 

1985 2,817 30.4% 

1986 2,829 30.3% 

1987 3,007 31.2% 

1988 3,179 31.9% 

1989 3,279 32.8% 

1990 3,349 33.2% 

Source: Office of Advocacy, U.S. Small Business Administration, “Women in Business,” 

1998; Bureau of Labor Statistics, 1998-2005. Projections by the Office of Economic Research, 

Office of Advocacy. 

Women-owned sole proprietorships are also rising rapidly. In 2000, 

women will own 7.1 million sole-proprietorships, 35 percent of all 

U.S. sole proprietorships, up 33 percent from the early 1990s.34 

Franchises owned by women seem to mirror their overall business 

involvement. A 1990 survey found that women, at least partially, 

owned just under one-third of all franchises.35 About 72 percent of 

women-owned businesses are in the service and retail trade 

industries and women-owned firms are growing fastest in the 

construction, wholesale trade and transportation industries (Tables 3 

and 4). 

In terms of revenue, women averaged 47 percent of men’s receipts in 

1990. That number is projected to grow to above 51 percent in 2000.36 

This new wave of women business owners is also inclined to take 

advantage of technology. A c c o rding to the Insight Researc h 

October 4, 2000 

In 1997, 3.9 million 

women were 

primarily selfemployed, 

representing 37 

percent of all 

Americans claiming 

some selfemployment earnings. 

■ ■ ■ 

■ ■ ■ 

About 72 percent of 

women-owned 

businesses are in the 

service and retail 

trade industries and 

women-owned firms 

are growing fastest in 

the construction, 

wholesale trade and 

transportation 

industries. 

This new wave of 

women business 

owners is also 

inclined to take 

advantage of 

technology. 

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Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 National Women’s Business Council
 

Women-owned 

companies will spend 

$34 billion this year 

on 

telecommunications 

equipment, internet 

access, and other 

technology services. 

■ ■ ■ 

Corporation, women-owned companies will spend $34 billion this 

year on telecommunications equipment, Internet access, and other 

technology services. 

Table 3 

Number of Women-owned Firms by Industry, 1992 

Industry Percent Number of 

Businesses 

Total 100.0% 5,888,883 

Services 53.6% 3,158,444 

Retail Trade 18.6% 1,093,342 

Finance, Insurance, and Real Estate 10.2% 602,802 

Construction 3.1% 183,695 

Wholesale Trade 2.6% 154,542 

Manufacturing 2.6% 152,346 

Transportation and Public Utilities 2.4% 141,623 

Agricultural Services, Forestry, 

and Fishing 1.4% 82,526 

Mining 0.6% 37,205 

Industries not Classified 4.8% 282,358 

Source: U.S. Department of Commerce, Bureau of the Census, 

Women-owned Businesses 

1992 Economic Census, 

Table 4 

Fastest Growing Women-owned Firms by Industry, 1987-1992 

Industry Percent 

Total 43.1% 

Construction 94.8% 

Wholesale Trade 87.3% 

Transportation and Public Utilities 77.5% 

Agricultural Services, Forestry, 

and Fishing 72.0% 

Manufacturing 62.1% 

Mining 40.8% 

Services 39.2% 

Finance, Insurance, and Real Estate 37.8% 

Retail Trade 36.9% 

Industries not Classified 52.8% 

Source: U.S. Department of Commerce, Bureau of the Census, 1992 Economic Census, 

Women-owned Businesses. 

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Table 5 

Number of Women-owned Firms by State, 1992 

State Number of Percent of State Number of Percent of 

Firms Nation Firms Nation 

United States Total 5,888,883 100.0% Kentucky 74,280 1.3% 

California 801,487 13.6% Alabama 71,466 1.2% 

Texas 414,179 7.0% Iowa 71,040 1.2% 

New York 395,944 6.7% Kansas 66,429 1.1% 

Florida 352,048 6.0% South Carolina 64,812 1.1% 

Illinois 250,613 4.3% Arkansas 50,440 0.9% 

Pennsylvania 227,500 3.9% Utah 45,626 0.8% 

Ohio 224,693 3.8% Nebraska 43,637 0.7% 

Michigan 193,820 3.3% Mississippi 40,879 0.7% 

New Jersey 164,798 2.8% New Mexico 40,636 0.7% 

Massachusetts 147,572 2.5% Maine 35,260 0.6% 

Georgia 143,045 2.4% Nevada 32,430 0.6% 

North Carolina 142,516 2.4% New Hampshire 31,492 0.5% 

Virginia 138,494 2.4% West Virginia 30,644 0.5% 

Washington 136,337 2.3% Idaho 29,946 0.5% 

Indiana 125,411 2.1% Hawaii 29,743 0.5% 

Minnesota 124,143 2.1% Montana 25,310 0.4% 

Maryland 121,777 2.1% Rhode Island 21,353 0.4% 

Colorado 121,659 2.1% Vermont 21,033 0.4% 

Missouri 117,885 2.0% Alaska 19,380 0.3% 

Tennessee 101,134 1.7% South Dakota 18,215 0.3% 

Wisconsin 99,357 1.7% North Dakota 15,355 0.3% 

Arizona 93,300 1.6% Delaware 14,904 0.3% 

Oregon 87,970 1.5% Wyoming 14,617 0.2% 

Oklahoma 82,894 1.4% District of Columbia 14,599 0.2% 

Connecticut 79,931 1.4% 

Louisiana Source: U.S. Department of Commerce, Bureau of the Census, 76,849 1.3% 1992 Economic Census, Women-Owned Businesses 

17
Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 

Women-owned
 

businesses are a
 

major force in the
 

U.S. economy, but to 

participate fully in its 

growth, they must 

have greater access to 

capital. 

■ ■ ■ 

Commercial banks 

represent a decreasing 

share of total 

financial assets, and 

their role in smallbusiness financing, 

while significant, is 

decreasing as 

competition in 

financial services 

increases. 

National Women’s Business Council 

THE CURRENT LENDING 

ENVIRONMENT 

Women-owned businesses are a major force in the U.S. economy, but 

to participate fully in its growth, they must have greater access to 

capital. Overall, 1993 National Survey of Small Business Finances 

statistics regarding credit extended to small businesses show that 

women receive only 12 percent of all credit provided to small 

businesses in the U.S. economy.37 Although that figure was up from 8 

percent in 1987, it points up the significant growth potential that 

remains in the market for lending to women business owners, a 

market that makes up 38 percent of all businesses. 

Commercial banks represent a decreasing share of total financial 

assets, and their role in small-business financing, while significant, is 

d e c reasing as competition in financial services increases. The 

National Survey of Small Business Finances discovered that between 

1987-1993, commercial banks’ and thrift institutions’ market share of 

Figure 1 

Suppliers of Small-Business Debt Financing
 

Percent of Total Debt Outstanding, 1993
 

18
Milken Institute and Economic Prosperity, Women and Access to Credit 

National Women’s Business Council 

small-business loans fell from 70.6 percent to 65.3 percent.38 In 1993, 

banks’ outstanding small-business debt was just 54 percent (Figure 1). 

Still, 50 percent of women-owned firms sought traditional loans to 

finance their businesses and 32 percent of these loans were from a 

commercial bank. There is concern that as banks become more 

centralized, lending will become increasingly depersonalized, 

negatively impacting lending to women further, while mergers and 

regulations could restrict the amount of credit provided to small 

businesses in general. 

High proportions of women are not well served by banks for their 

capital needs. While nearly three-fourths of women-owned firms are 

able to access credit in one form or another, about 60 percent of these 

firms used nontraditional finance sources such as finance companies 

for their business credit needs.39 This includes the more than 42 

percent of women who used personal credit cards to finance their 

businesses. This could subject women to unfair lending practices as 

well as artificially high interest rates and capital costs for their 

businesses. 

Traditional loans most frequently accessed in 1993 were vehicle loans, 

used by nearly 22 percent of women-owned firms.40 Lines of credit 

accessed by 18 percent of women-owned firms and equipment loans 

used by 12 percent of firms were the next most frequently accessed 

traditional loans. While 95 percent of women-owned firms with 

between 100 and 499 employees used traditional loans, only one-third 

of firms with no employees accessed traditional loans. 

Five percent fewer women than men – 32 percent versus 37 percent – 

used commercial banks to finance their businesses in 1993.41 Only 18 

percent of women-owned firms with no employees obtained credit 

from commercial banks. The same percent of women in 1994 used 

bank loans to expand their business, compared to over 45 percent of 

men. 

By 1998, only 52 percent of women-owned firms obtained bank credit 

to finance their businesses.42 Of those firms, one-third, 34 percent, had 

bank credit greater than $50,000 while 58 percent out of 59 percent of 

male business owners with bank credit enjoyed credit of that 

amount.43 That same year, 7 percent of women-owned businesses had 

bank credit over $500,000, compared with more than double that 

amount, 16 percent, for male business owners.44 

Though banks’ market share of small-business loans fell from 1987 to 

1993, credit extended to women rose 5 percent from – 50 percent to 55 

percent – in that same time period.45 This suggests that some banks 

and other financial service institutions are beginning to recognize the 

growing market opportunity of women-owned businesses. 

October 4, 2000 

There is concern that 

as banks become 

more centralized, 

lending will become 

increasingly 

depersonalized, 

negatively impacting 

lending to women 

further, while mergers 

and regulations could 

restrict the amount of 

credit provided to 

small businesses in 

general. 

■ ■ ■ 

Though banks’ 

market share of smallbusiness loans fell 

from 1987 to 1993, 

credit extended to 

women rose 5 percent 

– from 50 percent to 

55 percent – in that 

same time period. 

This suggests that 

some banks and other 

financial service 

institutions are 

beginning to 

recognize the growing 

market opportunity of 

women-owned 

businesses. 

19
Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 

While women 

business owners’ 

access to traditional 

sources of financing 

is improving, 

disparities in levels of 

financing and 

favorableness of 

terms remain. 

■ ■ ■ 

Family and friends 

remain a common 

source of financing 

for women-owned 

businesses, as are 

loans from finance 

companies. 

National Women’s Business Council 

While women business owners’ access to traditional sources of 

financing is improving, disparities in levels of financing and 

favorableness of terms remain. Minority women hold less bank credit 

than white women do, however, with only 38 percent of black women 

holding bank credit.46 

Family and friends remain a common source of financing for womenowned businesses, as are loans from finance companies. Ten percent 

of women business owners rely on each of these sources.47 

20
Milken Institute and Economic Prosperity, Women and Access to Credit 

National Women’s Business Council 

FINANCIAL INSTITUTIONS 

MEETING THE DEMAND 

Notwithstanding the value that lenders place on gathering 

information that is factored into credit decisions, a 1992 survey of 

women business owners reported that two-thirds experienced 

difficulty working with their financial institutions. Women business 

owners were 22 percent more likely to report problems dealing with 

their bank than businesses at large. One-third of women business 

owners surveyed perceived some degree of gender- b a s e d 

discrimination.48 

In 1993, the Federal Reserve Bank of Chicago and the Women’s 

Business Development Center of Chicago conducted informal 

interviews and focus groups with women small-business owners and 

lenders in the region. The women who participated in the study 

reported frustration with various aspects of the lending experience, 

which they believed reflected reluctance on the part of lenders to 

provide them with access to appropriate levels of credit. 

Women cited two primary reasons for switching lenders: delays in 

p rocessing loan requests and assignment to inexperienced loan 

officers who lacked influence in the organization.49 Women expressed 

criticism of gender-related remarks unrelated to the business or loan 

application process, which created the impression that gender-bias 

might influence the credit decision. They were disturbed to learn that 

the short-term financial disruptions of divorce were treated as longterm indicators of their credit-worthiness.50 Women business owners 

opined that their relationships with lenders should be collaborative, 

not adversarial. They perceived that men were more likely to receive 

competitively priced financial services geared toward retaining them 

as long-term customers. Finally, women business owners perceived 

that banks were trying to maximize profits up front in their dealings 

with them. 

Bank participants in the study acknowledged offering products and 

services on better terms to men, but suggested the reason was 

p robably that men were more aggressive negotiators for such 

services.51 

Because lending to startups was agreed to be a difficult area, both the 

women and lenders supported character lending.52 Yet, the discretion 

inherent in this type of lending raised concerns about the potential for 

inequitable treatment. The concerns expressed seem representative of 

the concerns of women entrepreneurs across the nation. The good 

October 4, 2000 

A 1992 survey of 

women business 

owners reported that 

two-thirds 

experienced difficulty 

working with their 

financial institutions. 

■ ■ ■ 

Women cited two 

primary reasons for 

switching lenders: 

delays in processing 

loan requests and 

assignment to 

inexperienced loan 

officers who lacked 

influence in the 

organization. 

■ ■ ■ 

Bank participants in 

the study 

acknowledged 

offering products and 

services on better 

terms to men, but 

suggested the reason 

was probably that 

men were more 

aggressive negotiators 

for such services. 

21
Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 

The 1992 numbers 

from the National 

Foundation for 

Women Business 

Owners documenting 

both the growth of 

women-owned 

enterprises and their 

problems in obtaining 

financing shocked the 

banks into action. 

■ ■ ■ 

■ ■ ■ 

Wells Fargo was one 

of the first major 

banks to visibly and 

aggressively 

campaign for the 

women’s business 

credit market. 

In 1995, it committed 

to lending $1 billion 

over three years to 

women’s businesses. 

In 1996, that figure 

was raised to $10 

billion over the 

course of 10 years. 

National Women’s Business Council 

news is that these concerns have been heard, if not universally 

addressed. According to Lucy Reid, former Executive Vice President 

of Wells Fargo Bank, this improvement is no accident. 

“The 1992 numbers from the National Foundation for Wo m e n 

Business Owners documenting both the growth of women-owned 

enterprises and their problems in obtaining financing shocked the 

banks, including ours, into action. At Wells Fargo, we were surprised 

to learn that women perceived that they had less access to capital than 

men did. Since women business owners are as financially responsible 

as male business owners, we saw an opportunity and we stepped up 

our outreach efforts.”53 Indeed, Wells Fargo was one of the first major 

banks to visibly and aggressively campaign for the women’s business 

credit market. In 1995, it committed to lending $1 billion over three 

years to women’s businesses. In 1996, that figure was raised to $10 

billion over the course of 10 years. 

22
Milken Institute and Economic Prosperity, Women and Access to Credit 

National Women’s Business Council 

CREATIVE SOLUTIONS: 

LENDING AND LEARNING 

The case studies highlighted throughout this report illustrate 

innovative lending and learning programs that lenders, government 

agencies and private entities have used to address the needs of 

women entrepreneurs. Among the elements identified as key to the 

success of many of these programs are the combinations of financial, 

managerial and technical assistance afforded to loan recipients that 

maximize the success potential of their businesses, and promoting 

community-lender partnerships. 

CASE STUDY 

FLEETBOSTON FINANCIAL 

One bank that has set an example in its efforts to establish 

relationships with women business owners is FleetBoston Financial. 54 

Its profit-driven strategy to seek out new growth markets led it to the 

women’s business market, which it found to be large, profitable and 

growing. In 1997, Fleet (the pre-merger BankBoston) sought to create 

an internal program that would determine women business owners’ 

needs, provide support and match financial products to their current 

stage of business. Positioned as a segment focus of the small-business 

division, the purpose of the new department was to leverage the 

bank’s available resources and channel them toward existing and 

prospective women clients. Its goal was to become the bank of choice 

for women entrepreneurs. 

The bank’s experience and research revealed that, in general, women 

business owners highly value information re s o u rces. It also 

discovered that there were enormous resources available to women 

entrepreneurs, but no one easy route to access them. In June 1998, 

Fleet launched the Women Entre p reneurs’ Connection (“The 

Connection”), a small-business banking program that offered women 

business owners a spectrum of products and services geared for 

business success. The program was initiated to assist startups as well 

as established businesses gain access to capital, information, 

advocacy and other resources for women-owned businesses. In an 

effort to match women-owned businesses with the financing best 

suited to its stage in the business cycle, The Connection aggressively 

markets its services within the bank as well as in the women’s 

business market. It educates lenders within Fleet on successful 

lending practices to women business owners while seeking 

opportunities to work with women entrepreneurs. The Connection 

October 4, 2000 

Elements identified as 

key to the success of 

many of these 

programs are the 

combinations of 

financial, managerial 

and technical 

assistance afforded to 

loan recipients that 

maximize the success 

potential of their 

businesses, and 

community-lender 

partnerships. 

■ ■ ■ 

Fleet launched the 

Women 

Entrepreneurs’ 

Connection, a smallbusiness banking 

program that offered 

women business 

owners a spectrum of 

products and services 

geared for business 

success. 

23
Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 

Fleet recently 

earmarked $2 billion 

as a financing 

initiative to support 

the growth of womenowned businesses. 

■ ■ ■ 

■ ■ ■ 

Beyond educating 

lenders within the 

bank about successful 

lending practices to 

women business 

owners, The 

Connection has 

partnered with 

organizations that 

provide technical 

assistance and 

business education to 

women. 

Women of color are 

starting businesses at 

three times the rate of 

others. 

National Women’s Business Council 

guides women entrepreneurs to the appropriate resources as their 

businesses grow and their needs expand. 

Fleet recently earmarked $2 billion as a financing initiative to support 

the growth of women-owned businesses. The bank found that many 

women used credit cards under circumstances that a bank loan would 

be available. The Connection team functions as a facilitator in the loan 

process and may obtain reconsideration for applications rejected on 

the basis of credit scoring. It also acts as a conduit to provide women 

e n t re p reneurs with information, technical assistance and 

relationships to benefit their entrepreneurial efforts. Accordingly, The 

Connection may intervene where credit has been denied and work 

with women to develop a plan for getting to credit-ready status. The 

Connection works with Fleet’s Community Development Group to 

review loans rejected on the basis of credit scoring and, under some 

c i rcumstances, aid in getting a loan approved thro u g h 

reconsideration under a special service loan program known as a 

“second look.” 

The Connection opens channels to equity financing in situations 

w h e re women are burdened by debt but poised to gro w, and 

introduces angel investors to the banks’ venture capital managers. It 

is partnered with both Fleet Development Ve n t u res, an urban 

investment bank that provides equity capital to women-owned 

businesses and other underserved markets, and with a number of 

venture funds established to make equity investments solely in 

women-owned businesses, such as the Women’s Growth Capital 

Fund, the Isabella Fund and others. 

Beyond educating lenders within the bank about successful lending 

practices to women business owners, The Connection has partnered 

with organizations that provide technical assistance and business 

education to women. One such partner is the Center for Women and 

Enterprise, a business development educational center in Boston built 

on the model of adult education centers. It also supports the 

“Commonwealth Institute” and their efforts to work with established 

women-owned businesses to help them grow their businesses and 

succeed financially. The Connection encourages the use of advisory 

boards and tries to facilitate networks from which they may be 

drawn. By creating the kinds of networks that male business owners 

have traditionally benefited from, women can also build connections 

to sources of funding. 

Women of color are starting businesses at three times the rate of 

others. In light of this statistic, the bank introduced a forum for 

women of color to express their specific needs. It also established an 

advisory board composed of women of color and the bank sponsors 

special networking events for this subgroup. 

24
Milken Institute and Economic Prosperity, Women and Access to Credit 

National Women’s Business Council 

Bank clients are educated about products for early-stage companies, 

such as loans under $100,000, and offered advice regarding cash flow, 

managing profitability, or other topics. They are taught to manage 

cash flow and how to grow a business. In some instances, The 

Connection finds a vendor for a loan applicant who has been rejected. 

Although the primary focus of the Connection is not on startups, 

t h e re are some products within the program for early-stage 

companies (first six months). For loans less than $100,000 there is a 

c redit product, Business Credit Express, that does not re q u i re 

business financials, but is more analogous to personal credit card 

scoring. Even where a loan application is rejected, the bank may find 

other sources for the loan. Borrowers are thus provided with a “road 

map” as the bank works with the borrower to move forward. 

The Connection has also forged a partnership with the Center for 

Women and Enterprise (CWE), a regional economic development 

corporation designed to empower women to become economically 

s e l f - s u fficient through entre p reneurship. CWE offers courses, 

workshops, one-on-one consulting, loan packaging and microlending 

services on a sliding scale basis. It provides a continuum of 

educational services for each level of the business life cycle. CWE 

targets low- to moderate-income women though its programs and 

services are available to men and women. CWE works with banks 

and the government, particularly Fleet and the SBA to obtain bank 

loans for CWE clients. 

October 4, 2000 

Bank clients are 

educated about 

products for earlystage companies, such 

as loans under 

$100,000, and offered 

advice regarding cash 

flow, managing 

profitability, or other 

topics. 

■ ■ ■ 

■ ■ ■ 

The Connection has 

also forged a 

partnership with the 

Center for Women 

and Enterprise, a 

regional economic 

development 

corporation designed 

to empower women to 

become economically 

self-sufficient through 

entrepreneurship. 

CWE provides a 

continuum of 

educational services 

for each level of the 

business life cycle. 

25
Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 National Women’s Business Council 

The current 

environment of bank 

consolidation and 

mergers raises 

concern that the 

supply of credit 

available to small 

businesses may be 

reduced. 

■ ■ ■ 

■ ■ ■ 

In theory, it can be 

argued that smaller 

institutions can pick 

up the credits cast off 

by larger lenders. In 

practice, however, the 

loss of lending 

options for women’s 

small businesses is 

very real. 

Smaller banks, 

expected to pick up 

loans displaced by 

larger institutions, are 

themselves suffering 

a liquidity crisis. 

WOMEN AND CHANGING 

DYNAMICS IN FINANCIAL 

MARKETS 

BANK CONSOLIDATION 

The current environment of bank consolidation and mergers raises 

concern that the supply of credit available to small businesses may be 

reduced. This concern exists because of the reduction in the number 

of lending institutions, and because “large organizationally complex 

institutions may be inefficient at providing these relationship-based 

services. Similarly there may be scale or organizational diseconomies 

in making relationship-based loans because of agency costs in 

monitoring relationship-based information generated by local 

loans.”55 

In theory, it can be argued that smaller institutions can pick up the 

credits cast off by larger lenders.56 In practice, however, the loss of 

lending options for women’s small businesses is very real, and the 

outsourcing of the credit function to lenders’ central offices results in 

the disruption of highly valued lending relationships.57 

“The process has become pro g ressively more standardized and 

mechanical, more dependent on documentation, analytical formulas, 

and rigid rules as opposed to examiner judgment. This may have 

disproportionately affected small-business lending, which often takes 

the form of character and cash-flow loans, requiring judgment, and 

where the bank’s return comes through knowledge and a working 

relationship with the borrower.”58 

LIQUIDITY CRISIS 

Smaller banks, expected to pick up loans displaced by larg e r 

institutions, are themselves suffering a liquidity crisis. Banks are 

finding themselves faced with a shrinking core of deposits and 

increased loan demand.59 Loan demand continues to outpace deposit 

growth. In 1998 the loan-to-deposit ratio at commercial banks hit an 

all-time high of 87.97 percent, up from an average of 65 percent 20 

years ago. 

“The steady funding shift away from core deposits presents a 

daunting challenge for community banks that have traditionally 

relied more heavily on core deposit funding than larger banks. 

26
Milken Institute and Economic Prosperity, Women and Access to Credit 

National Women’s Business Council 

According to the FDIC, at year-end 1998, 72 percent of aggregate 

community bank assets were funded with core deposits compared to 

43 percent at large banks. This reflects large banks’ greater use of 

wholesale funding alternatives and access to capital market 

instruments. Yet a consumer appetite for deposit products has been 

waning for some time. The FDIC notes that falling personal savings 

rates, higher yielding investment alternatives like mutual funds, and 

demographic shifts away from rural communities have all eaten into 

core deposit bases, leaving banks to consider alternative funding 

s o u rces ... For community banks...funding options tend to be 

limited. Because of high fixed costs, community banks may find it 

cost-prohibitive to tap capital markets through securitizations or 

public debt and equity offerings.”60 

SECURITIZATION 

One solution to this liquidity crisis might be securitization of the 

small-business loans so in demand by smaller lenders. In asset 

markets such as credit card receivables, home mortgages, and car 

loans, active secondary markets allow lenders to profit fro m 

economies of scale without having to add risky loans to their balance 

sheets.61 Securitization enables lenders to improve their capital return 

by substituting off balance-sheet, fee-based income sources with 

direct lending generating added liquidity and greater balance sheet 

d i v e r s i t y. Just as in the home mortgage market, borrowers of 

securitized loans would also enjoy lower financing costs. 

Securitization is facilitated by standardized loan writing criteria and 

information technology that makes estimating default probabilities 

and prepayment patterns easier.6 2 “ Wi d e s p read securitization of 

small-business loans is unlikely to occur until underwriting 

standards and loan documentation for these loans become more 

uniform and better information for estimating the risk of loss 

becomes available.”63 The use of credit scoring systems – literally a 

credit “score” based on a statistically developed checklist – in the 

origination of small-business loans is being examined to address the 

information gap in small-business lending that currently inhibits the 

securitization of small-business loans. 

Another risk mitigation innovation that could make investing in the 

emerging women’s market attractive to individual and institutional 

investors is a financial equity guarantee insurance system. The 

reduced the downside risk provided by such a system would enable 

and encourage equity investors to fund this emerging market. 

October 4, 2000 

One solution to this 

liquidity crisis might 

be securitization of 

the small-business 

loans so in demand 

by smaller lenders. 

■ ■ ■ 

■ ■ ■ 

Just as in the home 

mortgage market, 

borrowers of 

securitized loans 

would also enjoy 

lower financing costs. 

The use of credit 

scoring systems in 

the origination of 

small-business loans 

is being examined to 

address the 

information gap in 

small-business 

lending that currently 

inhibits the 

securitization of 

small-business loans. 

27
Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 National Women’s Business Council 

Credit scoring derives 

a single quantitative 

measure – the score – 

from a vast statistical 

sampling of past 

borrowers in order to 

predict the future 

payment performance 

of an individual loan 

applicant. 

■ ■ ■ 

■ ■ ■ 

Bankers argue that the 

scorecard is objective, 

while critics argue that 

credit scoring models 

discriminate by 

assessing low- and 

moderate-income 

applicants against a 

pool of more affluent 

borrowers. 

Credit scoring creates a 

roadblock for women 

trying to start small 

businesses who are 

unable to show recent 

income statements 

because they 

interrupted careers to 

care for children or 

elderly parents, or 

whose credit has 

always been in the 

name of a spouse. 

CREDIT SCORING 

Several factors set the call for credit scoring into motion. Banks found 

processing small-business loan applications to be labor intensive and 

time consuming. Small-business loan requests were insufficient to 

make them cost effective. Banks were faced with the choice of not 

offering small-business loans altogether or charging substantial fees 

regardless of the size of the loan. These factors moved banks to 

centralize the process, distancing lender and borrower even more. 

Credit scoring, an automated method that analyzes a large sample of 

past borrowers to calculate the probability that a loan applicant with 

certain specific characteristics will default, is of relatively recent 

origin, and only took hold at major U.S. lending institutions in the late 

1990s.64 Credit scoring derives a single quantitative measure – the 

score – from a vast statistical sampling of past borrowers in order to 

p redict the future payment performance of an individual loan 

applicant.65 A credit score measures a borrower’s propensity to repay 

the loan. The propensity to repay – “I would pay you back if I could” 

– is different than the capacity to repay. It is the propensity to repay 

that is measured. How one performs with one’s personal credit is a 

highly accurate indicator of the likelihood of repayment of a smallbusiness loan. 

Bankers argue that the scorecard is objective, while critics argue that 

credit scoring models discriminate by assessing low- and moderateincome applicants against a pool of more affluent borrowers.66,67 

Credit scoring makes small-business lending more attractive to larger 

lenders because the probability of default for a given applicant can be 

predicted fairly reliably, and variations in risk assessment across loan 

officers or by a single loan officer is eliminated over time.68 Still, there 

is concern that lenders will substitute scoring for relationships with 

small businesses. “This relationship is especially important for firms 

that do not have formal business plans or audited financial 

statements typically used in traditional underwriting of commercial 

loans.”69 

In assessing credit-worthiness, credit performance information far 

outweighs financial statement information. The particular difficulty 

faced by women is often dictated by social circumstance. A woman 

whose credit has always been in the name of a spouse would be 

unable to obtain commercial funding, even though she may be a 

reliable, credit-worthy applicant. The same holds true for women 

who are unable to show recent income statements because they 

interrupted careers to care for children or elderly parents. In these 

cases, credit scoring creates a roadblock for women trying to start 

small businesses. 

28
Milken Institute and Economic Prosperity, Women and Access to Credit 

National Women’s Business Council October 4, 2000 

CASE STUDY 

COUNT-ME-IN FOR WOMEN’S
 

ECONOMIC INDEPENDENCE 

Another successful lending program that has focused on improving 

access to credit by streamlining and expediting the loan process and 

a p p roval criteria is Count-Me-In For Women’s Economic 

Independence (Count-Me-In) an innovative online “lending and 

learning” microloan organization. Count-Me-In is dedicated to 

strengthening the position of women in the economy. This national 

nonprofit organization provides small loans to women who are not 

qualified, or fear applying, for conventional bank loans. Count-Me-In 

seeks to raise a loan fund of $25 million through $25 donations from 

one million groups of five women: $5 for each woman in the group. 

The fund addresses systemic challenges women face in their dealings 

with traditional lending institutions that do not account for the 

realities of women’s lives today. Count-Me-In raises money from 

women and makes loans to women for their businesses, but does not 

rely on traditional credit scoring methods to assess creditworthiness. 

This new source of women-generated money will in turn be loaned to 

other women for qualifying businesses. 

As part of this effort, Count-Me-In is developing a viable, reliable and 

p redictive credit-scoring technique that measures a woman’s 

economic life, personal experience and business development 

potential in evaluating eligibility for small-business loans. This new 

model will assess credit-worthiness more accurately by including 

information re g a rding specific experiences that impacted the 

applicant’s economic life, such as divorce, extended child or parent 

caretaker responsibilities, lack of personal credit or credit acquired in 

the name of a spouse. Its nonprofit status allows Count-Me-In to 

collect and track data otherwise prohibited under Federal Reserve 

Regulation B. To design this new credit-scoring model, Count-Me-In 

has assembled a nationwide team that includes loan officers from 

women’s business centers, private banks, the SBA, and Community 

Development banks. 

The new credit scoring process will supplement traditional credit 

scoring questions with additional questions regarding experience in 

the business, family participation, and goals. The credit scoring 

model provides a review of the women’s credit history as used in 

traditional methods and goes a step further by giving her points for 

her previous work experience in the same industry as her business, 

previous experience in making and selling the product, completion of 

Another successful 

lending program that 

has focused on 

improving access to 

credit by streamlining 

and expediting the 

loan process and 

approval criteria is 

Count-Me-In For 

Women’s Economic 

Independence. 

■ ■ ■ 

■ ■ ■ 

The fund addresses 

systemic challenges 

women face in their 

dealings with 

traditional lending 

institutions that do not 

account for the realities 

of women’s lives today. 

Count-Me-In is 

developing a viable, 

reliable and predictive 

credit-scoring 

technique that 

measures a woman’s 

economic life, personal 

experience and 

business development 

potential in evaluating 

eligibility for smallbusiness loans. 

29
Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 

The smaller sums of 

money that women 

often seek frequently 

make them 

unattractive 

applicants in the eyes 

of conventional 

lenders. 

■ ■ ■ 

■ ■ ■ 

Critics argue that 

credit scoring creates 

a “double whammy” 

for women-owned 

businesses because it 

is non-relationship 

based and the law 

precludes financial 

institutions from 

collecting statistical 

information about the 

propensity of women 

businesses owners to 

repay loans. 

The revision of 

Regulation B would 

allow lenders to 

gather information 

valuable in designing 

financial innovations 

targeted to this 

market. 

National Women’s Business Council 

a business plan, and a support system to help her implement the 

business. 

The credit scoring model was developed in consultation with Fair 

Isaac, the leading developer of traditional credit scoring systems. Six 

different software products are used to receive and process the 

application with new data being collected for statistical analysis by 

the organization. A back office is being provided under contract with 

American Express Business Financial Services with all of the 

traditional financial discipline applied to the loan reviews. Count-MeIn must make 2000 loans to establish the statistical base to review the 

credit scoring system and determine which questions are predicative 

of women’s repayment history. 

For many women, securing financing to start their own businesses is 

a challenge. The smaller sums of money that women often seek 

f requently make them unattractive applicants in the eyes of 

conventional lenders. The goal of Count-Me-In for Wo m e n ’ s 

Economic Independence is to give women tools and economic 

support that will enable them to create their own financial 

opportunities. 

FEDERAL RESERVE REGULATION B 

In credit scoring settings, loans may be flatly denied to businesses 

whose scores do not fall within the lender’s bandwidth. 

Discretionary, relationship-based settings allow other factors to be 

taken into consideration. Critics argue that credit scoring creates a 

“double whammy” for women-owned businesses because it is nonrelationship based and the law precludes financial institutions from 

collecting statistical information about the propensity of women 

businesses owners to repay loans. This restriction is imposed by 

Federal Reserve Regulation B (Reg. B), passed by the Board of 

Governors of the Federal Reserve in 1977 to comply with the Equal 

Credit Opportunity Act Amendment of 1976. That act provides that 

“a creditor shall not inquire about the sex of an applicant.”70 There is 

a similar provision regarding race. Initially, it was thought that such 

action would eliminate discrimination among lenders by creating a 

color and gender-blind lending market. However, the effect of this 

regulation has been to prohibit lenders from collecting important 

demographic data about their borrowers, there b y, albeit 

u n i n t e n t i o n a l l y, limiting lenders’ ability to target underserved 

groups.71 The revision of Regulation B would allow lenders to gather 

information valuable in designing financial innovations targeted to 

this market. 

30
Milken Institute and Economic Prosperity, Women and Access to Credit 

National Women’s Business Council 

LOAN RE-EVALUATION OR “SECOND 

LOOK” POLICIES 

Due to the problems associated with eliminating the “relationship” 

aspect of the lending process, some pro g ressive lenders have 

instituted a “second look” pro c e d u re to evaluate pro s p e c t i v e 

borrowers who were not given the “green light” by the credit scoring 

process. 

Under a “second look” procedure, borrowers rejected under credit 

scoring submit supplemental information. Analyzing the borrower’s 

business prospects as well as the character of the person enables 

banks to make more loans, increasing their own business while being 

more responsive to the needs of their local market. 

October 4, 2000 

Some progressive 

lenders have 

instituted a “second 

look” procedure to 

evaluate prospective 

borrowers who were 

not given the “green 

light” by the credit 

scoring process. 

■ ■ ■ 

Analyzing the 

borrower’s business 

prospects as well as 

the character of the 

person enables banks 

to make more loans, 

increasing their own 

business while being 

more responsive to 

the needs of their 

local market. 

31
Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 National Women’s Business Council 

Lenders have 

discovered that 

microenterprises 

become quite 

successful when these 

loans are combined 

with technical 

assistance and 

business training. 

■ ■ ■ 

■ ■ ■ 

Microloan borrowers 

are often just 

beginning to establish 

business credit, thus 

interest rates are 

similar to or lower 

than other business 

loans and usually 

require less collateral. 

Microenterprise 

development 

programs provide 

credit, training and 

technical assistance to 

individuals and 

groups seeking loans 

below the lending 

“radar” of 

conventional financial 

institutions. 

MICROLENDERS 

M i c rolenders provide microloans of several hundred dollars to 

$50,000 to microenterprises, the smallest form of business. Microloans 

are generally used for working capital or to purchase inventory, 

computers and other business equipment. Microloans create work, 

income and assets for businesses that might otherwise fail. 

Until re c e n t l y, microloans were thought to be money-losing 

propositions, however, lenders have discovered that microenterprises 

become quite successful when these loans are combined with 

technical assistance and business training. Some 49 percent of 

microbusinesses that receive microloans are still in business five years 

later.72 

Lenders use a completely diff e rent set of approval criteria for 

m i c ro l o a n s .7 3 M i c roloan borrowers are often just beginning to 

establish business credit, thus interest rates are similar to or lower 

than other business loans and usually re q u i re less collateral. 

Microenterprise development programs provide credit, training and 

technical assistance to individuals and groups seeking loans below 

the lending “radar” of conventional financial institutions. 

The most successful and widely duplicated microenterprise lending 

model of the past few decades is that of the Grameen Bank of 

Bangladesh. That program is targeted at the rural poor. The loans are 

made under a “peer lending” model, requiring all members of a loan 

group to repay the loan before additional loans are made. The 

Grameen Bank has lent $2.6 billion to 2.4 million borrowers since 

1976. Of those loans 95 percent were to women, and the bank has seen 

a remarkable 95 percent repayment rate. 7 4 T h e re are 350 

microenterprise programs and more than two million low-income 

microentrepreneurs in the United States today. 

CASE STUDY 

THE WISCONSIN WOMEN’S BUSINESS 

INITIATIVE CORPORATION 

A STATEWIDE ECONOMIC DEVELOPMENT 

CORPORATION, BUSINESS INCUBATOR AND 

MICROLENDER 

The Wisconsin Women’s Business Initiative Corporation (WWBIC) is 

a statewide economic development corporation certified as a 

Women’s Business Center, microlender and CDFI with an annual 

operating budget of $1.3 million. Its purpose is to provide quality. 

32
Milken Institute and Economic Prosperity, Women and Access to Credit 

National Women’s Business Council 

business education, unique business assistance programs and access 

to capital for women, minorities and economically disadvantaged 

individuals. One-third of its funding is from federal, state, and 

municipal governments, one-third is earned by contracting its 

services out to the community, and one-third is from foundations and 

corporations. Its staff of 18 is comprised of individuals with banking, 

accounting, legal and business ownership background. 

WWBIC functions in several capacities. The following discussion 

highlights several programs illustrative of similar initiatives around 

the nation that cover assistance, microlending, peer group lending 

and business incubators. 

BUSINESS EDUCATION AND ASSISTANCE 

WWBIC conducts more than 200 business workshops and learning 

experiences. Hands-on assistance is provided through one-on-one 

counseling and mentoring. The objective of WWBIC is to give 

individuals assistance and instruction that is usable. The most 

popular of its many courses and seminars is Start Smart, a 12-week 

class in business development in which the participants learn to 

create a business plan. Participants work on projects in groups, 

executing a variety of business-related assignments. Community 

entrepreneurs and business people from wide-ranging fields and 

socioeconomic backgrounds join the classes to advise and guide 

participants. 

BUSINESS INCUBATION 

WWBIC manages a business incubator in the heart of Milwaukee that 

focuses on women and minority businesses. Services include office 

space, shared services, training and one-on-one business assistance. 

The director and staff work intensely with the business owner on 

issues related to successful business operations including 

networking, marketing, promotions, legal stru c t u re and basic 

customer contracts. Typically, businesses are in the program up to 

two years, after which the relationship continues for six months to 

five years. The object is to speed the participant’s learning curve for 

acquiring business acumen. Incubator clients are matched with paid 

consultants or professional volunteers to mentor them for a given 

period of time. At the conclusion of the program, clients are skilled in 

marketing, finances, legal issues and problem solving. Business 

owners pay for their consulting services, thereby learning to work 

with consultants. 

October 4, 2000 

WWBIC manages a 

business incubator in 

the heart of 

Milwaukee that 

focuses on women 

and minority 

businesses. 

■ ■ ■ 

■ ■ ■ 

The object is to speed 

the participant’s 

learning curve for 

acquiring business 

acumen. 

Incubator clients are 

matched with paid 

consultants or 

professional 

volunteers to mentor 

them for a given 

period of time. 

33
Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 

WWBIC stresses the 

importance of access 

to financing options 

and other components 

on the capital access 

spectrum such as peer 

loans, microloans, gap 

financing, creative 

loan packaging, 

guaranteed loan prequalification 

packages and venture 

capital opportunities. 

■ ■ ■ 

■ ■ ■ 

The peer loan 

program creates an 

opportunity to 

participate in 

valuable cooperative 

learning. 

The WWBIC loan 

committee expects to 

make 25 to 40 

microloans per year 

with an average loan 

size of $15,000. 

National Women’s Business Council 

SOCIAL BUSINESS VENTURE/BUSINESS 

LABORATORY 

WWBIC owns and operates a social business venture, “Coffee Shop 

with A Conscience,” located in a local library. This coffee house sells 

specialty coffee drinks, coffee beans and products from WWBIC loan 

clients. The coffee shop is used as a business laboratory, providing 

valuable early business experience. Participants track inventory, 

handle customer relations, learn merchandising and marketing 

techniques, and tabulate sales and expense figures. 

LENDING SERVICES 

WWBIC stresses the importance of access to financing options and 

other components on the capital access spectrum such as peer loans, 

microloans, gap financing, creative loan packaging, guaranteed loan 

pre-qualification packages and venture capital opportunities. 

PEER LOAN PROGRAM 

WWBIC conducts a peer loan program in which groups of four to 10 

individuals determine how a small loan of $500 to $1,500 will be used 

among them. This program conducts outreach in low-income 

communities. WWBIC has found church and faith-based 

communities to be particularly responsive and suitable for a 

microloan program where group support and peer pressure is often 

substituted for collateral. The peer loan program creates an 

opportunity to participate in valuable cooperative learning. 

Individual group meetings plus mandatory monthly meetings at 

WWBIC among all peer loan groups provide a forum for feedback 

and information about the businesses of all participating groups. 

Involvement in the group loan process also makes them more 

attractive to a loan committee. 

MICROLOAN PROGRAM 

WWBIC is the largest microlender in the state and county. It has 

b o r rowed $2 million, primarily from the U.S. Small Business 

Administration, to make microloans in amounts ranging from $100 to 

$25,000. The WWBIC loan committee expects to make 25 to 40 

microloans per year with an average loan size of $15,000. The use to 

which clients can apply these funds is flexible. However, they may 

not be used to retire existing debt. WWBIC strongly encourages its 

borrowers to take advantage of the classes and one-on-one assistance 

it offers to complement the loans it provides. 

Each WWBIC loan application undergoes complete loan analysis. 

Past credit problems and bankruptcies must be explained in writing 

and a business plan and financial projections must accompany the 

34
Milken Institute and Economic Prosperity, Women and Access to Credit 

National Women’s Business Council 

application. The loan committee is made up of volunteer bankers, 

accountants, attorneys and members of the community. 

WWBIC has developed its own “credit scoring” system and approves 

most loans if the business appears to be viable and the individual 

seeking the loan appears to have the ability to carry out and expand 

the business idea. 

SBA PRE-QUALIFICATION GUARANTEE PACKAGING 

Applications are reviewed and packaged with the expectation that 

the SBA will approve a 50 to 80 percent loan guarantee. Each loan has 

a WWBIC staff member assigned to oversee the loan who reviews the 

progress of the client and brings in additional resources, if necessary. 

WWBIC helps individuals shop their loans and is able to steer them 

to lenders who are willing to take more risks. WWBIC is also familiar 

with venture capital sources within the state willing to look at equity 

deals, although WWBIC itself does not conduct any venture capital 

investing. 

October 4, 2000 

WWBIC has 

developed its own 

“credit scoring” 

system and approves 

most loans if the 

business appears to 

be viable and the 

individual seeking 

the loan appears to 

have the ability to 

carry out and expand 

the business idea. 

■ ■ ■ 

WWBIC helps 

individuals shop their 

loans and is able to 

steer them to lenders 

who are willing to 

take more risks. 

35
Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 National Women’s Business Council 

The Small Business 

Administration has 

initiated a number of 

programs, that 

facilitate the 

financing of small 

businesses generally, 

some of which are 

specifically targeted 

to women-owned 

businesses. 

■ ■ ■ 

■ ■ ■ 

The federal 

government 

guarantees 50 to 80 

percent of loans made 

to qualified small 

businesses. 

Banks are discounting 

the opportunity to 

enter the women’s 

market segment 

regardless of federal 

insurance. 

FEDERAL LENDING AND
 

INVESTMENT PROGRAMS
 

SMALL BUSINESS ASSOCIATION LOAN 

GUARANTEE PROGRAMS 

The Small Business Administration (SBA) has initiated a number of 

programs that facilitate the financing of small businesses generally, 

some of which are specifically targeted to women-owned businesses. 

Perhaps the most important thing that the SBA has done to stimulate 

the growth of small businesses is its commitment to guarantee the 

loans of small-business owners. Under these programs, the federal 

government guarantees 50 to 80 percent of loans made to qualified 

small businesses. Still, banks are not encouraged by federal 

guarantees to engage in high-risk investments and lend primarily to 

existing businesses rather than startups, i.e. new businesses not yet 

generating a steady revenue stream. However, with only a small 

portion of the loan at risk, lenders are less likely to decline funding 

and have incentives to increase the number of loans they make to 

small firms. Efforts to obtain credit under guaranty programs are 

enhanced by additional SBA initiatives that pre-qualify borrowers for 

SBA loans, raise the guaranty level of certain loans and provide 

technical assistance to assure that otherwise risky borrowers have the 

support they need to succeed. 

The largest providers of SBA-backed loans are non-banks, though 

traditional lenders are beginning to increase their SBA lending. Since 

the SBA initiated programs that “reduce paperwork, speed loan 

approval and reduce costs associated with their programs, such loans 

have become a more cost-effective way for banks to penetrate 

segments of the small-business market.”75 

A particularly lucrative market segment is women, which, in the past, 

has largely been ignored by the banking industry. For a number of 

reasons, banks have been reluctant to lend to women in the past. The 

advent of SBA-guaranteed loans creates the opportunity for banks to 

test out this rapidly growing market segment at a greatly minimized 

risk. Still, women receive roughly just one-sixth of all SBA-guaranty 

loans, disappointing considering women’s nearly 40 perc e n t 

participation in the marketplace (Figure 2). This tells us that banks are 

discounting the opportunity to enter the women’s market segment 

regardless of federal insurance. This trend should shift as banks begin 

to appreciate the high revenue potential and sound credit risk in 

lending to women. 

36
Milken Institute and Economic Prosperity, Women and Access to Credit 

National Women’s Business Council October 4, 2000 

Figure 2 

Total Amount of all SBA Loans vs. Loans to Women (Gross) 

CASE STUDY 

COMMUNITY EXPRESS 

The Community Express Loan Program – operated by the Small 

Business Administration (SBA), the National Community 

Reinvestment Coalition (NCRC), and several national banks – has 

incorporated several elements identified as increasing the likelihood 

of success: mitigating risk, streamlining and expediting the loan 

process and approval criteria, and creating lender-government and 

lender-community partnerships. 

Community Express is in its second year of a five-year pilot program. 

The Community Express program is part of the SBA’s New Markets 

Initiative to spur economic development and job creation in 

underserved communities through assistance to small businesses that 

have difficulty obtaining traditional loans. The Community Express 

p rogram targets two markets: low- and moderate-income 

geographies and women- and minority-owned businesses, regardless 

of geography or income. 

The Community 

Express Loan Program 

has incorporated 

several elements 

identified as increasing 

the likelihood of 

success: mitigating risk, 

streamlining and 

expediting the loan 

process and approval 

criteria, and creating 

lender-government and 

lender-community 

partnerships. 

■ ■ ■ 

The Community 

Express program is part 

of the SBA’s New 

Markets Initiative to 

spur economic 

development and job 

creation in underserved 

communities through 

assistance to small 

businesses that have 

difficulty obtaining 

traditional loans. 

37
Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 National Women’s Business Council 

The key to the 

Community Express 

program is that it 

provides smallbusiness owners with 

technical and 

management 

assistance in 

budgeting, marketing 

and management, 

before and after the 

loan is made. 

■ ■ ■ 

■ ■ ■ 

The rate of lending 

through Community 

Express to businesses 

owned at least 50 

percent by women is 

consistently running 

at about 54 percent of 

total loans. 

As of August 2000, the 

SBA approved 119 

loans totaling $11.8 

million and 54 

percent of these loans 

went to businesses 

owned 50 percent or 

more by women. 

Lenders may use the same streamlined loan processing procedures 

for Community Express loans as used for SBA Express loans. SBA 

Express lenders use their own paperwork and procedures to issue 

SBA loans without the SBA’s direct involvement. In return for this 

flexibility, the loan guaranty is limited to 50 percent. Guaranty 

percentages are increased to 80 percent for loans up to $100,000 and 

to 75 percent for loans up to $250,000 for Community Express loans. 

The borrower is able to combine loan terms and lines of credit to craft 

the kind of financing it needs, up to these limits. 

The key to the Community Express program is that it provides smallbusiness owners with technical and management assistance in 

budgeting, marketing and management, before and after the loan is 

made. Borrowers receive hands-on training and support as a loan 

condition. Lenders partner with technical assistance providers in each 

market to provide assistance to each Community Express borrower 

tailored to that borrower’s needs. Lenders compensate technical 

assistance providers for their services. 

Lenders work with the NCRC, which is charged with coordinating 

the technical assistance program nationally, to select a qualified 

technical assistance provider. “Technical assistance may be provided 

by the participating lender, the nonprofit community organization 

partner, or a combination of both. Lenders and community-based 

technical assistance providers enter agreements outlining their roles, 

financial support, and mutual referrals. Technical assistance under 

Community Express is viewed as added protection for both SBA and 

the lender, and as an indicator of the borrower’s commitment. 

Technical assistance, in fact, may be used as collateral enhancement. 

SBA is willing to raise its guaranty level for this pilot from the SBA 

Express 50 percent level to the 7(a) guaranty level, in part because it 

wants to test the role of technical assistance in preventing default and 

facilitating borrower’s success.”76 

The rate of lending through Community Express to businesses owned 

at least 50 percent by women is consistently running at about 54 

percent of total loans. As of August 2000, the SBA approved 119 loans 

totaling $11.8 million, and 54 percent of these loans went to 

businesses owned 50 percent or more by women. 

Ten lenders participating in the initial phase originated those loans. 

On July 28, 2000, the SBA and NCRC announced a major expansion 

of Community Express to 500 new lenders that meet SBA criteria. 

Lending will surge dramatically as new banks come aboard in the 

next six to 12 months while the 10 original lenders are aggressively 

expanding to new markets. Businesses supported by Community 

Express contribute to their communities through job creation and 

neighborhood revitalization. 

38
Milken Institute and Economic Prosperity, Women and Access to Credit 

National Women’s Business Council 

504 CERTIFIED DEVELOPMENT 

COMPANIES (CDCS) 

The SBA guarantees certain small-business loans, called Section 504 

loans, for the purpose of financing fixed assets. These loans can only 

be issued through special non-profit lenders, certified by the SBA, 

called Certified Development Corporations (CDC’s). 504 loan 

proceeds must be used for fixed-asset projects, such as the purchase 

of land, machinery and equipment, construction, improvements, 

conversions and landscaping. The proceeds cannot be used for 

working capital or inventory, consolidating or repaying debt, or 

refinancing. 

To be eligible, the business must be for-profit and have a tangible net 

worth of less than $6 million and a net income of less than $2 million. 

Loans cannot be used for speculation or investment in rental real 

estate. 

504 projects are typically structured to include a loan secured with a 

senior lien from a private-sector lender covering up to 50 percent of 

the project cost, a loan secured with a junior loan from the CDC in the 

Figure 3 

Women’s Share of SBA Loans vs. Share of Business Ownership 

October 4, 2000 

The SBA guarantees 

certain small-business 

loans, called Section 

504 loans, for the 

purpose of financing 

fixed assets. These 

loans can only be 

issued through special 

non-profit lenders, 

certified by the SBA. 

■ ■ ■ 

To be eligible, the 

business must be forprofit and have a 

tangible net worth of 

less than $6 million 

and a net income of 

less than $2 million. 

Loans cannot be used 

for speculation or 

investment in rental 

real estate. 

39
Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 National Women’s Business Council 

In the three-quarter 

period October 1, 1999 

through June 30, 2000, 

the SBA approved 

nearly $1.3 billion in 

504 funding. 

■ ■ ■ 

■ ■ ■ 

Of the $1.3 billion 

funded in that period, 

women business 

owners received 

about $176 million, or 

13.5 percent of the 

loan funds, the same 

percentage issued to 

women in all 1999. 

The fiscal year 2000 

loans to women are 

nearly 50 times 

greater than the 1986 

loan amounts, with an 

annual increase 

average of 47 percent. 

Figure 4 

Average Annual Increase in SBA Loans to Women 

form of a 100 percent SBA-guaranteed debenture, covering up to 40 

percent of the cost, and a contribution of at least 10 percent equity 

from the small business receiving assistance. The maximum SBA 

debenture generally is $750,000 (up to $1 million in some cases). 

Because the program is designed to enable small businesses to create 

and retain jobs, the CDC’s portfolio must create or retain one job for 

every $35,000 provided by the SBA.77 

In the three-quarter period October 1, 1999 through June 30, 2000, the 

SBA approved nearly $1.3 billion in 504 funding.78 Of the $1.3 billion 

funded in that period, women business owners received about $176 

million, or 13.5 percent of the loan funds, the same percentage issued 

to women in all 199979 (Figure 3). The amount of 504-loan money 

going to women continues to increase. The fiscal year 2000 loans to 

women are nearly 50 times greater than the 1986 loan amounts, with 

an annual increase average of 47 percent80 (Figure 4). The 2001 budget 

request would increase the total amount of 504 loans to $3.75 billion.81 

7(A) LOAN GUARANTEE PROGRAM 

The 7(a) Loan Guaranty Program is one of SBA’s largest lending 

programs. The 7(a) loan guarantee program offers lenders a 75 to 80 

40
Milken Institute and Economic Prosperity, Women and Access to Credit 

National Women’s Business Council 

p e rcent government guarantee for loans they make to small 

businesses.82 

These loans are extraordinarily flexible and can be used for almost 

any business purpose, including working capital, acquisition of 

furniture, fixtures, machinery and equipment, purchase of inventory, 

construction, renovation or improvements, and purchase of real 

estate. Repayment ability from the cash flow of the business is a 

primary consideration for loan approval. However, good character, 

management capability, collateral and owner’s equity contribution 

are also important considerations. All owners of 20 percent or more 

are required to provide a personal guarantee. Generally, $750,000 is 

the maximum amount the SBA will guarantee. Lenders are able to 

make loans under $100,000 with an 80 percent SBA repayment 

guarantee and loans up to $1 million with a 75 percent SBA 

guarantee.83 

In 2000, over $9 billion in loans were issued through the 7(a) loan 

program.84 Women received 16 percent of these loans.85 While this 

percentage may seem low compared to the percent of all businesses 

owned by women in 1999, it represents a 4 percent improvement 

(Figure 3). This increase is not an anomaly. The amount of 7(a) loans 

awarded to women increased 19 percent each year on average since 

1973 (Figure 4). The 2000 loan amounts to women – about $1.6 billion 

– are more than 55 times greater than the loan amounts issued in 

1973.86 The 2001 federal budget would increase the amount of federal 

money in this program to $11.5 billion. 87 

PRE-QUALIFICATION PILOT LOAN 

(PREQUAL) PROGRAM 

Notwithstanding the lending incentive that loan guarantees offer, 

obtaining a loan remains difficult. Borrowers are discouraged or 

turned away by a lender’s presumption that a particular loan would 

not receive SBA a p p roval. A c c o rd i n g l y, the SBA has initiated 

additional programs to enhance speed and standardization of the 

process, and to reduce the risk that qualified applicants will be turned 

away due to a misapplication of lender discretion. 

The SBA’s Pre-Qualification Pilot Loan (PreQual) Program is a 7(a) 

program that enlists primarily nonprofit intermediaries to assist 

prospective borrowers with viable loan application packages.88 This 

program, originally introduced as the Women’s Pre-Qualification 

Pilot Loan Program in June 1994, was later expanded to more 

aggressively market the SBA’s loan programs to minorities and other 

underserved markets. Under this program, the intermediary and the 

October 4, 2000 

In 2000, over $9 

billion in loans were 

issued through the 

7(a) loan program. 

■ ■ ■ 

■ ■ ■ 

The 2000 loan 

amounts to women – 

about $1.6 billion – 

are more than 55 

times greater than the 

loan amounts issued 

in 1973. 

Notwithstanding the 

lending incentive that 

loan guarantees offer, 

obtaining a loan 

remains difficult. 

Borrowers are 

discouraged or turned 

away by a lender’s 

presumption that a 

particular loan would 

not receive SBA 

approval. 

41
Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 National Women’s Business Council 

SBA Express makes it 

even easier for banks 

to make smallbusiness loans by 

allowing lenders to 

use their own forms 

in the application 

process, while still 

guaranteeing a threeday response time 

from the SBA. 

■ ■ ■ 

Technical assistance 

and follow-up 

provide added 

protection against 

default and may be 

viewed as a form of 

collateral 

enhancement. 

applicant work together to evaluate the feasibility of a proposed 

project, develop a business plan and prepare a loan application. With 

an SBA commitment letter to the lender prequalifying the borrower 

for up to $250,000, banks are more likely to approve the loan 

request.89,90 

SBA LOW DOCUMENTATION 

(LOWDOC) 

The SBA Low Documentation (LowDoc) program streamlines the 

loan process by providing an SBA guaranteed response to a loan 

application within three days. The LowDoc program provides a 75 

percent SBA repayment guarantee on loans up to $150,000.91 

SBA Express makes it even easier for banks to make small-business 

loans by allowing lenders to use their own forms in the application 

process, while still guaranteeing a three-day response time from the 

SBA. Under SBA Express, banks receive an SBA guarantee of 50 

percent on loans up to $150,000.92 

COMMUNITY EXPRESS 

As noted in its case study, Community Express is an innovative pilot 

p rogram off e red by the SBA in conjunction with the National 

Community Reinvestment Coalition (NCRC). It offers a three-day 

t u r n a round, but with an increased maximum loan amount of 

$250,000.93 

Technical assistance is the key aspect of the Community Express 

Program. In each target market, Community Express lenders work 

with the NCRC to select a qualified technical assistance provider from 

NCRC membership organizations. These organizations are 

community-based nonprofits with knowledge of local needs and 

access to local resources. Each borrower is paired with a local 

technical assistance pro v i d e r, who designs an action plan that 

includes appropriate pre- and post-loan support, monitoring and 

technical assistance. The technical assistance and follow-up provide 

added protection against default and may be viewed as a form of 

collateral enhancement. 

SBA MICROLOAN PROGRAM 

Many small businesses too small to participate in 504 or 7(a) 

programs require only nominal amounts of capital. For these microenterprises, the SBA instituted a microloan program that assists both 

startups and existing businesses (Figure 5). Under this program, the 

42
Milken Institute and Economic Prosperity, Women and Access to Credit 

National Women’s Business Council October 4, 2000 

Figure 5 

Percent of MicroLoans Received by Business Type 

SBA provides funds to nonprofit organizations that, in turn, make 

loans ranging from $100 to $25,000.94 The average loan-size is $9,300. 

The women’s micro-enterprise market is growing. In 2000, over 600 

SBA microloans worth about $6.6 million were made to women 

business owners.95 This represents an increase in SBA microloan 

dollars of over 300 percent since 1993. For the three-quarter period 

October 1, 1999 through June 30, 2000, the SBA microloan program 

made 475 loans to businesses wholly owned by women. This 

represents almost 38 percent of the total microloans for this period at 

an amount of $5,063,100. For businesses that were at least 51 percent 

women-owned, but fell short of 100 percent, 126 microloans were 

made, almost 10 percent of the total, in an amount of $1,538,886. The 

2001 budget proposes $60 million in microloans and another $45 

million in technical assistance for microloan borrowers.96 

The SBA has created a number of loan programs to facilitate more 

equitable and efficient lending to small businesses. These SBA-backed 

loans have resulted in an increase of lending to small businesses, and 

in particular to women-owned businesses. However, the percentage 

of loans to women varies widely by loan category. Women received 

the smallest share of the most popular loans (7A, 504 and LowDoc), 

The women’s microenterprise market is 

growing. In 2000, over 

600 SBA microloans 

worth about $6.6 

million were made to 

women business 

owners. 

■ ■ ■ 

■ ■ ■ 

The SBA has created a 

number of loan 

programs to facilitate 

more equitable and 

efficient lending to 

small businesses. 

These SBA-backed 

loans have resulted in 

an increase of lending 

to small businesses, 

and in particular to 

women-owned 

businesses. 

43
Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 National Women’s Business Council 

The percentage of 

loans to women varies 

widely by loan 

category. Women 

received the smallest 

share of the most 

popular loans while 

the majority of loans 

made to women came 

from those programs 

that made the lowest 

awards. 

■ ■ ■ 

Although the 

minority- and 

women- focused loans 

are encouraging 

lending to women, 

banks appear to be 

wary of engaging in 

major transactions 

with women. The 

number and amounts 

of loans issued to 

women have been on 

the rise since the 

initiation of SBA loan 

programs, but are 

disappointingly far 

from representative of 

women involved in 

enterprise. 

Figure 6 

Total SBA Loans vs. SBA Loans to Women 

while the majority of loans made to women came from those 

programs that made the lowest awards. In fiscal year 2000, women 

received only 16 percent of all 7(a) loans, which represent 81 percent 

of all fiscal year 2000 SBA loans. At the same time, women received 42 

percent of Community Express Loans, which make up only 0.08 

percent of all fiscal year 2000 SBA loans (Figure 6 and Figure 7). 

Although the minority- and women- focused loans are encouraging 

lending to women, banks appear to be wary of engaging in major 

transactions with women. The number and amounts of loans issued 

to women have been on the rise since the initiation of SBA loan 

programs, but are disappointingly far from representative of women 

involved in enterprise. 

SBA WOMEN’S BUSINESS CENTERS 

The Small Business Administration partially funds a network of 

Women’s Business Centers (WBC) in the 50 states and territories. Of 

the 92 original Women’s Business Centers, 23 have graduated from 

the program and no longer need SBA funding. The Wi s c o n s i n 

44
Milken Institute and Economic Prosperity, Women and Access to Credit 

National Women’s Business Council October 4, 2000 

Figure 7 

Percentage of SBA Loans to Women by Category 

Women’s Business Initiative Corporation, noted as a model program 

in this report, began as a Women’s Business Center. These WBCs 

provide a wide range of services to women entrepreneurs at all levels 

of business development. Their primary purpose is educational and 

they offer time-intensive focus on the individual as an investment not 

only in business capital, but in human capital as well. WBCs provide 

individual business counseling and training in areas related to in 

finance, management and marketing. Many also serve as 

intermediaries for the SBA’s MicroLoan and Loan Prequalification 

programs.97 About $12 million in Women’s Business Center support 

has been proposed in the administration’s 2001 budget.98 

CDFI: U.S. TREASURY COMMUNITY 

DEVELOPMENT FINANCIAL 

INSTITUTIONS 

Community Development Financial Institutions (CDFIs) are private, 

grassroots organizations whose social mission is to lend money and 

provide technical assistance, venture capital investments and basic 

Community 

Development 

Financial Institutions 

are private, grassroots 

organizations whose 

social mission is to 

lend money and 

provide technical 

assistance, venture 

capital investments 

and basic financial 

services to individuals 

or groups that might 

otherwise be 

considered too risky 

by traditional lenders. 

■ ■ ■ 

45
Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 National Women’s Business Council 

They reach areas that 

do not have 

traditional banks and 

initiate economic 

activity. A variety of 

organizations and 

funds qualify as 

CDFIs, some of which 

focus on womenowned businesses. 

■ ■ ■ 

■ ■ ■ 

SBICs provide equity 

capital, long-term 

loans, debt-equity 

investments and 

management 

assistance to 

qualifying small 

businesses. 

In 1999, SBIC 

financing totaled 

$4.22 billion. About 6 

percent, or $55 

million, went to 

women-owned 

businesses. 

financial services to individuals or groups that might otherwise be 

considered too risky by traditional lenders.99 They reach areas that do 

not have traditional banks and initiate economic activity. A variety of 

organizations and funds qualify as CDFIs, some of which focus on 

women-owned businesses. 

The Treasury Department’s CDFI Fund invests in local CDFIs to make 

them more viable assets to the communities they serve.100 Since the 

fund was created in 1994, over $300 million has been awarded to 

increase the lending capacity and technical assistance ability of CDFIs 

across the country.101 Some $88 million of the fund’s awards to date 

have been part of the Bank Enterprise Award Program (BEA). These 

awards provide incentives for banks and other traditional lending 

institutions to invest in CDFIs as well as to increase their own direct 

lending to distressed areas of the communities they serve. The BEA 

has leveraged $1.8 billion in bank and thrift financing to support 

these goals and to build healthy private markets in these areas.102 

SBA SMALL BUSINESS INVESTMENT 

COMPANIES (SBICS) 

The Small Business Investment Company (SBIC) Program licenses 

privately owned and managed investment firms that use their own 

capital, plus funds borrowed at a favorable rate with an SBA 

guarantee, to lend and make venture capital investments in small 

businesses. SBICs provide equity capital, long-term loans, debtequity investments and management assistance to qualifying small 

businesses. SBIC funding is available for all types of manufacturing 

and service industries. In 1999, SBIC financing totaled $4.22 billion. 

About 6 percent, or $55 million, went to women-owned businesses. 

A Specialized SBIC (SSBIC) is an SBIC that is specially targeted to the 

needs of entre p reneurs who are socially or economically 

disadvantaged. In the SSBIC program, women’s businesses received 

14 percent of the total amount of financing.103 

While the main focus of the SBIC program is equity investment, about 

$1.2 billion in SBIC investments involve debt or debt mixed with 

equity. 

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CASE STUDY 

CAPITAL ACROSS AMERICA 

AN SBA-LICENSED SBIC TARGETING WOMENOWNED BUSINESSES 

Capital Across America (CXA) is a mezzanine fund that lends money 

primarily to women who own businesses with revenue in excess of $1 

million. CXA is the first of three licensed SBICs that target womenowned businesses. CXA’s objective is to assist women-owned or 

women-led companies. Before CXA and its counterparts came into 

existence in 1996, only 1 percent of SBIC funds went to womenowned companies. 

CXA oversees $28 million dollars in partnership with institutional 

investors. CXAloans range from $300,000 to $1.5 million and focus on 

business growth. CXA’s largest investors are Bank One, First Union 

and Bank of America. The average loan is $900,000 per company. For 

larger loans, CXA will package loans in concert with other Small 

Business Investment Companies. 

CXA has trademarked an innovative debt instrument that works like 

equity. “Dequity” is a five-year loan based on projected cash flow that 

does not require collateral. The borrower pays interest-only for five 

years, and then the principal is repaid along with part of the upside 

of the company. The importance of this structure for women is that 

the loan looks and feels like equity, but does not result in ownership 

or control by CXA as would a typical equity fund. This generalizes 

f rom advances in financial innovation in the cooperative bond 

markets that provide capital access without excessive ownership 

dilution. 

CXA assists companies that are no-tech or low-tech that traditional 

venture capitalists are not attracted to. This includes manufacturing, 

wholesale distribution, transportation, printing and insurance. CXA 

assesses the financial health of the company and the strength of its 

senior management, conducts on-site visits and performs reference 

and credit checks. Credit scoring is used in conjunction with its other 

tools of assessment. Whether CXA sits on the company’s board is 

determined in part by the size of the loan. 

OTHER FEDERAL PROGRAMS 

HOUSING AND URBAN DEVELOPMENT (HUD) 

The U.S. Department of Housing and Urban Development (HUD) 

p rograms work in conjunction with community economic 

development activities. 

October 4, 2000 

Capital Across 

America is a 

mezzanine fund that 

lends money 

primarily to women 

who own businesses 

with revenue in 

excess of $1 million. 

■ ■ ■ 

■ ■ ■ 

Before CXA and its 

counterparts came 

into existence in 1996, 

only 1 percent of 

SBIC funds went to 

women-owned 

companies. 

CXA assists 

companies that are 

no-tech or low-tech 

that traditional 

venture capitalists are 

not attracted to. 

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Economic Prosperity, Women and Access to Credit	 Milken Institute and 

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Location is often a 

strong determinant of 

a small business’ 

access to capital. 

■ ■ ■ 

Department of 

Agriculture designed 

a variety of programs 

to create and maintain 

employment and 

improve the economic 

climate in rural 

communities. 

National Women’s Business Council 

■	 HUD’s Community Development Block Grant program provides 

annual grants to local governments for physical and economic 

development purposes.104 

■	 HUD’s Economic Development Initiative (EDI) works alongside 

block grants to assist small businesses directly. EDI funds may be 

used to guarantee loans to small businesses through a loan-loss 

reserve or to lower interest rates charged to small businesses in 

the economic development area. Some $35 million were allocated 

to the EDI in 1999.105 

UNITED STATES DEPARTMENT OF AGRICULTURE (USDA) 

Location is often a strong determinant of a small business’ access to 

capital. Rural firms, for example, often have their own set of needs 

that remain unmet by metropolitan lenders. In response, the U.S. 

Department of Agriculture (USDA) designed a variety of programs to 

assist rural and farm-based businesses. The primary purpose of these 

programs is to create and maintain employment and improve the 

economic climate in rural communities.106 

■	 The Business and Industry Direct Loan Program provides up to 

$10 million to public or private entities experiencing difficulty 

obtaining financing elsewhere. 

■	 The Business and Industry Guaranteed Loan Program 

guarantees up to 90 percent of a commercial loan to businesses 

in rural areas. Any one borrower may borrow a maximum of 

$25 million to be used for working, building or physical capital. 

■	 The Intermediary Relending Program provides funds to 

intermediary community development organizations in rural 

areas. These intermediaries establish a revolving loan fund that 

may loan up to $150,000 to small businesses.107 

■	 Rural Business Enterprise Grants provide funds to public bodies 

and nonprofit corporations to finance and facilitate development 

of small and emerging private business enterprises in rural areas. 

■	 Technical assistance and business training are provided for these 

emerging businesses through Rural Business Opportunity 

Grants. These funds are also made available to public bodies and 

non-profit corporations. 

■	 USDA also provides Rural Economic Development Loans and 

Grants for utility companies operating in rural areas. 

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In 1999, 941 loans and 453 grants totaling $1,365,246,287 were 

disbursed through USDA business programs. This resulted in 79,839 

jobs created or saved and 3,742 businesses assisted in rural areas 

across the country. USDA has allocated $995 million in funding for its 

rural business programs in 2000.108 

STATE CAPITAL ACCESS PROGRAMS 

Capital Access Programs (CAPs) are loan portfolio insurance 

programs that establish a reserve account in each bank involved in 

the program. A portion of each loan made in this program is set aside 

in a reserve account. The participating state government matches this 

reserve account deposit. This account can be accessed to offset any 

non-repayment of a CAP loan and cover the entire loss through the 

reserve account. The benefit of this program is that CAP enables 

lenders to make riskier small-business loans than would otherwise be 

justified under traditional lending models. 

Federal legislation [PL103-325] allows allocation of federal funds to 

State CAP reserves though no funds have been allocated to date. To 

enable this allocation, the existing legislation needs to be changed to 

allow the Treasury Department CDFI to enlarge the existing 

appropriation and make a proportionate allocation to State CAP 

p rograms. The importance of this legislative change must be 

impressed upon ranking members of both the Senate and the House 

Banking and Appropriations Committees so that an appropriate 

contribution can be made to State CAP reserves. 

Since the first CAP program began in Michigan in 1986, about $1.2 

billion has been lent to small businesses, with an average loan size of 

$59,000.109 Today, 19 states and two cities operate CAPs. In 1998, more 

than $246 million in new CAP loans were made to small businesses 

across the country. In Texas, 18 percent of businesses receiving 

TexCAP loans were women-owned firms.110 These firms received 10 

percent of the dollar value of these loans. In Illinois, women’s 

businesses secured 22 percent of the CAP loans, and 18 percent of the 

dollar value of those loans.111 

Establishment of a national loan portfolio insurance pro g r a m 

modeled after state capital access programs such as these would have 

dramatic results. 

THE COMMUNITY REINVESTMENT ACT
 

The Community Reinvestment Act (CRA) was enacted in 1977 to 

ensure that banks and thrifts met the credit needs of underserved 

groups in their communities. Specifically, the act is intended to 

October 4, 2000 

Capital Access 

Programs are loan 

portfolio insurance 

programs that 

establish a reserve 

account in each bank 

involved in the 

program. A portion of 

each loan made in this 

program is set aside 

in a reserve account. 

■ ■ ■ 

CAP enables lenders 

to make riskier smallbusiness loans than 

would otherwise be 

justified under 

traditional lending 

models. 

■ ■ ■ 

Establishment of a 

national loan 

portfolio insurance 

program modeled 

after state capital 

access programs such 

as these would have 

dramatic results. 

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Economic Prosperity, Women and Access to Credit Milken Institute and 

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Banker’s Community 

Development 

Corporation Loan 

Program is a 

consortium of San 

Diego banks that 

pools funds. 

■ ■ ■ 

■ ■ ■ 

This for-profit loan 

program, 

administered by the 

nonprofit CDC Small 

Business Finance 

Corporation, targets 

businesses owned by 

women, minorities, 

and other 

underserved 

borrowers that do not 

meet SBA or 

conventional lending 

criteria. 

About 50 percent of 

its loans are currently 

made to women 

business owners. 

increase the amount of money invested through lending in older, 

central city, and low-income environments. As a result, about twothirds of all small-business loans and one-fifth of all small farm loans 

are made by CRA reporting institutions. Over $1 trillion in new 

investments and loans have been made to these underserved 

communities since 1977.112 

The CRA does not specify detailed requirements or lending quotas. 

Compliance is determined through examination by federal 

regulators. Failure to comply with the CRA guidelines can cost banks 

their freedom to merge with other banks or to open new branches in 

the future. One creative way to meet this requirement is to support 

intermediaries such as consortium lending corporations that 

specialize in financing small and minority businesses. “By 

participating in consortia organizations, a bank can reduce, but 

leverage the amount of its capital devoted to small-business finance, 

share risks, and share the costs of lending to riskier small firms.”113 

CASE STUDY 

BANKER’S COMMUNITY 

DEVELOPMENT CORPORATION LOAN 

PROGRAMS 

A MICROLOAN PROGRAM FUNDED BY A 

CONSORTIUM OF BANKS 

B a n k e r’s Community Development Corporation Loan Pro g r a m 

(Banker’s CDC) is a consortium of San Diego banks that pools funds 

to provide financing to small businesses while mitigating risk. Its 

mission is to supply capital to businesses that do not qualify for 

traditional bank financing for business growth so that they may 

eventually qualify for conventional bank financing. Because it targets 

underserved borrowers, the banks in the Bankers CDC consortium 

meet their Community Reinvestment Act (CRA) requirements. This 

for-profit loan program, administered by the nonprofit CDC Small 

Business Finance Corporation, targets businesses owned by women, 

minorities, and other underserved borrowers that do not meet SBAor 

conventional lending criteria. About 50 percent of its loans are 

currently made to women business owners. 

Each bank owns a percentage of every loan and is repaid when loan 

payments are made. When the loan is paid, the investors are paid. If 

a loan goes unpaid, the investing banks each lose money on the loan. 

Microloans averaging $30,000 are also part of the program. Because of 

the high cost of processing microloans, Bankers CDC contracted with 

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National Women’s Business Council October 4, 2000
 

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Economic Prosperity, Women and Access to Credit Milken Institute and 

October 4, 2000 

Borrowers receive 

management 

consulting services as 

part of the loan terms. 

■ ■ ■ 

■ ■ ■ 

Banker’s CDC 

requires its borrowers 

to take advantage of 

the technical 

assistance offered. 

It retains a pool of 

CPA’s and marketing 

experts who agree to 

consult with 

borrowers on an 

ongoing basis for six 

months. 

National Women’s Business Council 

the CDC Small Business Finance Corporation to run the program for 

them. Banker’s CDC is now lending from its sixth loan pool, which is 

$394,000 in size. The first five pools made loans to more than 80 

businesses, totaling $2.2 million. Each loan application is submitted to 

a loan committee. Growth companies are targeted over startups, and 

the applicant must have been in business for at least one year. 

Startups are funded only if the entrepreneurs can show experience in 

the industry or business management experience. Banker’s CDC 

Microloan Program does not use credit scoring and evaluates each 

loan on its own merits. It looks for evidence of good character 

through a sincere effort in the borrower’s credit history to repay bills. 

This is beneficial to borrowers who have not developed credit 

histories or whose credit histories are flawed. Borrowers receive 

management consulting services as part of the loan terms. Banker’s 

CDC re q u i res its borrowers to take advantage of the technical 

assistance offered. It retains a pool of CPA’s and marketing experts 

who agree to consult with borrowers on an ongoing basis for six 

months. If marketing services are required, then a marketing expert is 

also assigned to assist with marketing. A fee of $1,000 is added to each 

loan to cover the cost of the consultants. If the company remains 

current for one year, $600 is rebated. 

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REPORT RECOMMENDATIONS 

AMEND FEDERAL RESERVE REGULATION B – 

EQUAL CREDIT OPPORTUNITY ACT 

Federal Reserve Regulation B is intended to encourage fairness by 

prohibiting lenders from collecting data regarding an applicant’s 

gender or race, among other things. Despite its intent, its effect is to 

mask actual lending practices with regard to women and womenowned businesses. This regulation ought to be amended to allow the 

collection of demographic information from borrowers. This revision 

would allow banks to operate as effectively in the women’s business 

lending market as they have in the home mortgage market, where 

collection of demographic data has opened lending to underserved 

communities. Without specific knowledge of the demographic 

composition of small-business borrowers, including those that apply 

but do not receive approval, the ability to systematically measure and 

monitor programs that advance women’s business ownership 

participation is compromised. 

CREATE NEW CREDIT SCORING MODELS 

Innovations in credit scoring models, specifically those that 

incorporate data relevant to women and women-owned businesses, 

would generate new growth opportunities. Lenders will benefit from 

models that more accurately address lending risks associated with 

women-owned businesses by producing a better understanding of 

their market. The efficacy of this recommendation depends greatly on 

the implementation of the first recommendation, which would make 

gathering the necessary data possible. 

IMPLEMENT A NATIONAL CAPITAL ACCESS 

PROGRAM 

A National Capital Access Program (CAP) would create a reserve 

insurance pool that will allow banks to make loans that would not 

otherwise be made, thereby creating new financing opportunities for 

thousands of businesses. As women-owned businesses continue to 

strive to gain the confidence of lenders, CAPs allow banks to make 

loans that would not be made without the reserve insurance pool that 

CAPs provide. While women-owned businesses receive only 12 

percent of all credit extended, under the CAP program in California, 

for example, 30 percent of loans go to minority- and women-owned 

businesses.114 

EXPLOIT SECURITIZATION 

Financial institutions could pool standardized small-business loans 

and sell them as securities to institutional investors. This would 

Without specific 

knowledge of the 

demographic 

composition of smallbusiness borrowers, 

including those that 

apply but do not receive 

approval, the ability to 

systematically measure 

and monitor programs 

that advance women’s 

business ownership 

participation is 

compromised. 

■ ■ ■ 

■ ■ ■ 

Lenders will benefit 

from models that more 

accurately addresslending risks associated 

with women-owned 

businesses by 

producing a better 

understanding of their 

market. 

As women-owned 

businesses continue to 

strive to gain the 

confidence of lenders, 

CAPs allow banks to 

make loans that would 

not be made without 

the reserve insurance 

pool that CAPs provide. 

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Economic Prosperity, Women and Access to Credit Milken Institute and 

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The combination of 

high bond ratings at 

issuance, the 

multiplier effect of 

returning reserves to 

the available pool of 

funds, and the 

encouragement of 

specialty lenders for 

underserved smallbusiness borrowers 

makes securitization a 

vigorous policy tool 

for encouraging 

economic growth. 

■ ■ ■ 

Every five years the 

U. S. Census Bureau 

conducts the 

Economic Census. 

This is the only major 

source of facts about 

the structure and 

functioning of the 

nation’s economy. 

enable banks to increase liquidity, lower transaction costs and thus 

i n c rease their ability to make additional loans. The use of 

securitization in combination with a National Capital Access Program 

(CAP) would encourage a new segment of lenders to specialize in this 

area. The need for specialty lenders, like those currently available for 

auto loans, exists because small-business loans require sophisticated 

personnel and resources to adequately analyze credit-worthiness. 

Securitization serves to increase the availability of funds for lending 

– first, by immediately returning the principal to the lender, and 

second, by releasing the reserve fund in advance of the lender’s 

withdrawal from the program. 

Under current regulations, CAP loan reserves must be held at the 

originating bank until program liquidation. Under securitization, the 

reserves are released when the bonds mature, usually in five to 10 

years from issuance. These additional funds, up to 8 percent of the 

original loan amount, generate a loan dynamic multiplier estimated 

at 23 times. In addition to this large “reserve-release-multiplier” 

effect, the reserves themselves serve to vastly improve the bond 

rating agency’s view of these securities. Under the rating systems in 

use at the major bond rating agencies, the combination of protections 

available would result in investment-grade ratings. The combination 

of high bond ratings at issuance, the multiplier effect of returning 

reserves to the available pool of funds, and the encouragement of 

specialty lenders for underserved small-business borrowers makes 

securitization a vigorous policy tool for encouraging economic 

growth. 

Another risk mitigation innovation that could make investing in the 

emerging women’s market attractive to individual and institutional 

investors is a financial equity guarantee insurance system. The 

reduced downside risk provided by such a system would enable and 

encourage equity investors to fund this emerging market. 

INSTITUTIONALIZE THE ECONOMIC CENSUS, THE 

SURVEY OF WOMEN-OWNED BUSINESS 

ENTERPRISES, THE SURVEY OF MINORITY OWNED 

BUSINESS ENTERPRISES, THE CHARACTERISTICS 

OF BUSINESS OWNERS SURVEY AND THE SURVEY 

OF SMALL BUSINESS FINANCING. 

Every five years the U. S. Census Bureau conducts the Economic 

Census. This is the only major source of facts about the structure and 

functioning of the nation’s economy. Policymaking agendas of the 

federal government use the data especially in monitoring economic 

activity and providing assistance to businesses. As a part of the 

Economic Census, the Bureau issues its Survey of Minority-Owned 

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Milken Institute and Economic Prosperity, Women and Access to Credit 

National Women’s Business Council 

Business Enterprises (SMOBE), Survey of Women-Owned Business 

Enterprises (SWOBE) and the Characteristics of Business Owners 

Survey (CBO). These surveys provide the only national data on 

selected economic, demographic, and sociological characteristics 

among minority, women, non-minority male, and all business owners 

and their businesses. The release this October of the 1997 data will 

mark only the sixth Economic Census that includes women and 

minority enterprises. 

Following the release of the Economic Census and the various 

surveys, the Federal Reserve conducts its own examination (cofunded by the Small Business Administration) of the data to more 

closely understand the finances of small businesses and the credit 

conditions they face. The Federal Reserve has conducted this Survey 

of Small Business Finances (SSBF) following the last three releases of 

the Economic Census. 

While the U.S. Code (Sections 131, 191 and 224) directs the Census 

Bureau to take the Economic Census every five years, funding for 

these valuable programs, including SMOBE, SWOBE and CBO, are at 

the will of our legislators. The U.S. Congress should support these 

very important special census programs and include them when 

considering budget allocations. Without these surveys, federal 

agencies like the SBA will not have the resources to determine the 

needs of the business sectors, and consequently, programs and 

ultimately entre p reneurs will suff e r, placing our entire 

macroeconomy at risk. 

October 4, 2000 

The Federal Reserve 

conducts its own 

examination of the 

data to more closely 

understand the 

finances of small 

businesses and the 

credit conditions they 

face. 

■ ■ ■ 

Without these 

surveys, federal 

agencies like the SBA 

will not have the 

resources to 

determine the needs 

of the business 

sectors, and 

consequently, 

programs and 

ultimately 

entrepreneurs will 

suffer, placing our 

entire macroeconomy 

at risk. 

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APPENDIX A: 

INITIATIVES OF THE WHITE HOUSE AND 

CONGRESS 

The most recent White House Conference on Small Business in 1995 recognized this 

growing sector of women’s business. Displaying its desire to contract with women’s 

businesses, the conference’s 1996 report urges Congress to enact legislation that would 

designate a national certification organization for federal procurement dollars. This would 

create a database of certified women’s small businesses accessible by all federal agencies 

contracting with the private sector, thereby increasing the likelihood of women’s firms 

obtaining federal procurement.115 

The White House Conference recognized the importance that technical assistance plays in 

the development of small businesses. The result of this focus on training was the 

enactment of the Small Business Job Protection Act of 1996. This act allows employees to 

deduct up to $5,250 in employer-paid tuition from their taxable income each year, 

allowing for greater accessibility of workforce training and education.116 

The United States Congress also recognized that women-owned small businesses are a 

powerful force in the economy.118 In the Women’s Business Centers Sustainability Act of 

1999, Congress noted that between 1987 and 1996, “the rates of growth for women-owned 

small businesses in the United States for the fastest growing industries were: 171 percent 

in construction; 157 percent in wholesale trade; 140 percent in transportation and 

communications; 130 percent in agriculture; and 112 percent in manufacturing.” These are 

precisely the industries that much of the government’s contracting work comes from, yet 

they remain largely untapped. 

In the Senate bill, Congress found that “the participation of women-owned small 

businesses in the United States in the procurement market of the Federal Government is 

limited.” More specifically, “the rate of Federal procurement for women-owned small 

business is 2.2 percent.” The Senate thus asked that the Comptroller General of the U.S. 

conduct an audit of the procurement system to arrive at “any recommended means to 

increase the number of Federal contracts awarded to women-owned small businesses.”117 

The implementation of these initiatives is key to sustaining both aggregate growth and the 

contribution of women-owned businesses to it. 

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APPENDIX B: 

SUMMARY OF RESEARCH
 

Current research about women-owned businesses points more and more to the fact that 

women are improving their access to and use of financial capital partially as the result of 

improved practices. Nevertheless, gender discrimination persists. A 1994 survey found 

that of those women-owned firms having difficulty securing credit, only 25 percent were 

ultimately successful. This compares to 33 percent of men-owned firms.118 

Gary Becker postulated in his 1957 study that prejudicial discrimination in capital markets 

would most likely occur in concentrated markets. In this environment, bankers would act, 

according to Becker, as if they were willing to pay something in order to satisfy their 

discriminatory tastes. In capital markets, this would mean that bankers would be 

unwilling to lend to minority groups, thus incurring the cost of lost profit, unless these 

debtors were willing to pay a higher than average interest rate as compensation for having 

to deal with these groups of people. Competitive markets would tend not to tolerate 

discrimination to the same extent due to the greater demand for debtors in that 

environment. 

In 1998, Ken and Linda Cavalluzzo tested Becker’s theory in both concentrated and 

competitive markets using the Federal Reserve’s 1988-1989 National Survey of Small 

Business Finances.119 The 1987 data available in the report showed that while minorities 

did indeed still face discrimination in concentrated markets, women received treatment 

more similar to that of white men. 

This study found similar demand for credit across all demographic and gender groups. 

The denial and interest rates were not similar however. Blacks and Hispanics experienced 

35 percent more denials than white males. Hispanics and Asians paid one-and-a-half 

percentage points more in interest in their loans than did white males. 

Women, however, fared much better. Cavalluzzo and Cavalluzzo discovered that women 

business owners in concentrated markets pay one-third less of a percentage point in 

interest than white males. Women in concentrated markets also seemed to receive better 

treatment than did women in competitive markets. In concentrated markets, for instance, 

women pay less for interest and are 9.5 percent more likely to obtain credit than their peers 

in competitive markets. The study proposes that banks in these concentrated areas place 

more emphasis on working with women business owners to obtain credit than do banks 

in competitive markets. 

Cavalluzzo, Cavalluzzo, and Wolken followed up this study in 1999 by looking at the 

same issues with data from the 1993 National Survey of Small Business Finances.120 Again 

they found that on average females had access to credit comparable to businesses owned 

by males. The rates women pay for loans again were lower in more concentrated markets 

than in competitive markets. This time, however, they found that denial rates for women 

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Economic Prosperity, Women and Access to Credit Milken Institute and 

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increased along with bank concentration. Women business owners paid higher rates than 

men in concentrated markets and had 13 percent higher denial rates than men did. 

Another study compares the Federal Reserve’s most recent Survey of Small Business 

Finances of 1993 with the survey from the 1980s. This report by George and Deborah 

Haynes finds that between 1987 and 1993, women business owners have gained access to 

line-of-credit loans from banks similar to that of white males.121 Women’s proportion of 

debt that is comprised of lines of credit approached that of men during that time span. 

Women business owners’ reliance on family and friends as a source of lending remained 

constant, however, between 1987 and 1993. Perhaps partly because of this fact, fewer 

women used commercial banks for lending into the 1990s. 

Fewer differences exist as of the early 1990s between men and women in terms of access 

to line-of-credit loans. This also signals greater access for women in general to mainstream 

lenders and debt instruments. 

Haynes and Haynes offer six possible reasons as to why women have achieved this similar 

credit access: 1) The quality of women’s firms is increasing; 2) women owners are better 

business educated and experienced than before; 3) women owners’ risk preferences have 

changed and they have begun to seek more capital; 4) women are becoming more active 

in businesses that require more financing and collateral; 5) lenders have more experience 

lending to women and see them as less of a risk than before; 6) small businesses in general 

have switched to line-of-credit financing due to its relatively lower cost to the business 

owner. 

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REFERENCES
 

1 Haynes, George W. and Deborah C. “The Debt Structure of Small Businesses Owned by Women in 

1987 and 1993,” Journal of Small Business Management. April 1, 1999; Bureau of the Census, 1976. 

2 Bureau of the Census: 1996; Ibid. 

3 Ibid. 

4 National Foundation for Women Business Owners (NFWBO). “Key Facts about Women-Owned 

Businesses,” 1999. 

5 SBA Office of Advocacy. “Small Business Lending in the United States,” July, 1999, p. 2. 

6 Bureau of Labor Statistics, U.S. Department of Labor, 

http://stats.bls.gov/opub/rtaw/pdf/table05.pdf 

7 Cole, Rebel A. and Wolken, John D. “Bank and Nonbank Competition for Small Business Credit: 

Evidence from the 1987 and 1993 National Surveys of Small Business Finances.” Federal Reserve 

Bulletin. November 1996, p. 991. 

8 Small Business Administration, June 2000. 

9 Teresa Cavanagh, “Access to Capital: Making the Connection for Women Business Owners,” Fleet 

Bank. 

10 National Survey of Small Business Finances 

11 Id. p.24. 

12 Growing Women’s Businesses, National Women’s Business Council, September 1997. 

13 OECD Conference, “Women Entrepreneurs in SMEs: A Major Force in Innovation and Job 

Creation,” Synthesis, April 1997, p. 4. 

http://www.oecd.org/dsti/sti/industry/smes/prod/synth.htm. 

14 National Foundation for Women Business Owners, “Financing the Business: A Report on Financial 

Issues from the 1992 Biennial Membership Survey of Women Business Owners,” October 1993. 

15 The Insight Research Corporation, “Women-Owned Businesses Embrace High-Tech Tools,” 

http://www.insight-corp.com/wmsmall.html. 

16 The National Foundation for Women Business Owners (www.nfwbo.org) is the premier source of 

information on women business owners and their firms worldwide. Its mission is to support the 

growth of women business owners and their enterprises through research and information sharing. 

NFWBO provides original research to document the economic and social contributions of womenowned firms, public relations services to maximize the benefits of this knowledge and leadership 

development for women who own growing enterprises. 

17 E. Holly Buttner and Dorothy P. Moore, “Women’s Organizational Exodus to Entrepreneurship: 

Self-Reported Motivations and Correlates With Success,” Journal of Small Business Management, 

January 1997. 

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18 Jennifer E. Cliff, “Does One Size Fit All? Exploring the Relationship Between Attitudes Towards 

Growth, Gender and Business Size,” Journal of Business Venturing, Vol. 13, No. 6, November 1998, p. 

523-542. 

19 Candida G. Brush, “Research on Women Business Owners: Past Trends, New Perspectives and
 

Future Directions,” Entrepreneurship: Theory and Practice, Vol. 16; No. 4., Summer 1992, p. 5.
 

20 OECD, p. 20.
 

21 Ibid, p. 20.
 

22 Allen N. Berger, “The Big Picture About Relationship-Based Finance,” Atlanta Federal Reserve
 

Bank, Partners’ Newsletter, Vol. 9 No. 3, Winter 1999, p. 3, 7.
 

23 Ibid. p. 3.
 

24 OECD, p. 16.
 

25 Bureau of Labor Statistics, U.S. Department of Labor,
 

http://stats.bls.gov/opub/rtaw/pdf/table05.pdf 

26 National Foundation for Women Business Owners (NFWBO) “Key Facts about Women-Owned
 

Businesses,” 1999. 

27 SBA Office of Advocacy. “Small Business Lending in the United States,” July 1999, p. 2.
 

28 Haynes, George W. and Deborah C. “The Debt Structure of Small Businesses Owned by Women in
 

1987 and 1993,” Journal of Small Business Management, April 1, 1999; Bureau of the Census, 1976.
 

29 Bureau of the Census 1996; Haynes, supra.
 

30 NFWBO 1999, supra.
 

31 Ibid.
 

32 U.S. Small Business Administration, Office of Advocacy (SBA) “Women in Business,” October 1998,
 

p. 2.
 

33 Ibid. p. 9.
 

34 Ibid, p. 1.
 

35 Ibid, p. 12.
 

36 Ibid, p. 9.
 

37 Cole, Rebel A. and Wolken, John D. “Bank and Nonbank Competition for Small Business Credit:
 

Evidence from the 1987 and 1993 National Surveys of Small Business Finances.” Federal Reserve 

Bulletin. November 1996, p. 991.
 

38 Glenn Yago and Michael Harrington, “Mainstreaming Minority Business: Financing Domestic
 

Emerging Markets,” Milken Institute, February 1999.
 

39 SBA. “Women in Business,” October 1998, Table 12. 

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National Women’s Business Council October 4, 2000
 

40 Ibid. 

41 Ibid, Table 13. 

42 National Foundation for Women’s Business Owners (NFWBO). “Capital, Credit and Financing: An 

Update. Comparing Women and Men Business Owners’ Sources and Uses of Capital.” 1998, p. 3. 

43 Ibid, p. 2. 

44 Ibid. 

45 Cole, Rebel A. and Wolken, John D. “Bank and Nonbank Competition for Small Business Credit: 

Evidence from the 1987 and 1993 National Surveys of Small Business Finances.” Federal Reserve 

Bulletin. November 1996, p. 991. 

46 National Foundation for Women’s Business Owners (NFWBO). “Capital, Credit and Financing: An 

Update. Comparing Women and Men Business Owners’ Sources and Uses of Capital.” 1998, p. 1 

47 SBA“Women in Business,” Table 13. 

48 National Foundation for Women Business Owners, “Financing the Business: A Report on Financial 

Issues from the 1992 Biennial Membership Survey of Women Business Owners,” p. 5. 

49 Federal Reserve Bank of Chicago, “Access to Credit: A Guide for Lenders and Women Owners of 

Small Businesses,” May 1996, p. 15. 

50 Ibid, p. 9-10. 

51 Ibid, p. 15. 

52 Ibid, p. 22-23. 

53 National Foundation for Women Business Owners, “Women Business Owners Make Progress in 

Access to Capital; Still Lag Men-Owned Businesses in Credit Levels,” Press Release, October 17, 1996, 

p. 2. 

54 Based on an interview with Teresa Cavanagh, Senior Vice President, FleetBoston Financial, Founder
 

and Director, Women’s Entreprenuer’s Connection.
 

55 Berger, p. 3.
 

56 Ibid, p. 4.
 

57 Linda Darragh, Women’s Business Development Center of Chicago.
 

58 Federal Reserve Bulletin, May 1993, p. 394.
 

59 “Deposit Slump Squeezes Liquidity at Nation’s Community Banks,” Currency, a quarterly publication of Grant Thornton’s National Financial Services Committee, Vol. 13, No. 1, Spring 2000,
 

http://www.gt.com/resources/finance/currency/win00b.html.
 

60 Ibid.
 

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October 4, 2000 National Women’s Business Council
 

61 Board of Governors of the Federal Reserve System, “Report to Congress on the Availability of
 

Credit to Small Businesses,” 1996, p. 36.
 

62 Ibid.
 

63 Ibid, p. 37.
 

64 Federal Reserve Bank of Atlanta, “Credit Scoring in Small Business Lending: Bane or Blessing?”
 

Financial Update, 12/2, 1999,
 

http://www.frbatlanta.org/publica/finan_update/v12n2/fu_v12n2_1.html.
 

65 Federal Reserve Bank of Atlanta, “The Score on Credit Scoring in Small Business Lending,”
 

EconSouth, 1/3, 1999, http://www.frbatlanta.org/publica/econ_south/1999/q3/es_v1n3_3.html.
 

66 Ibid.
 

67 Ibid. 

68 Board of Governors of the Federal Reserve System, “Report to Congress on the Availability of
 

Credit to Small Businesses,” 1996, p. 32.
 

69 Federal Reserve Bank of Atlanta, “Credit Scoring in Small Business Lending: Bane or Blessing?”
 

supra.
 

70 U.S. Government Printing Office, Code of Federal Regulations, Banks and Banking, Federal Reserve
 

System, “Equal Credit Opportunity (Regulation B), Rules Concerning Taking of Applications,”
 

Revised January 1, 1999.
 

71 Office of Thrift Supervision. “Joint Agency Comments on Advance Notice of Proposed Rulemaking
 

Under Regulation B.” http://www.ots.treas.gov/docs/64007.html.
 

72 Peggy Clark and Amy Kays, “Microenterprise and the Poor,” The Aspen Institute, 1999, p. 17.
 

73 Bruce G. Posner, “Behind the Boom in Microloans,” Inc. Magazine, Quote by Gordon R. Pow of Key
 

Bank, April 1, 1994, 

http://www.inc.com/incmagazine/articles/details/print/0,7570,ART2885,00.html. 

74 Ford Foundation Report, “A Special Issue on Women: Now It’s a Global Movement,” Vol. 31, No. 1, 

Winter 2000, p. 11. 

75 Board of Governors of the Federal Reserve System, “Report to Congress on the Availability of 

Credit to Small Businesses,” p. 23.
 

76 NCRC Summary of “COMMUNITY EXPRESS” Pilot NCRC’s Banker/Community Collaborative
 

Council and The U.S. Small Business Administration.
 

77 SBA, www.sba.gov/financing/frcdc504.html.
 

78 SBA, http://www.sba.gov.
 

79 Ibid.
 

80 Ibid. 

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81 SBA News Release,”President Clinton’s New Opportunity Agenda Proposes Record Level of 

Investment, Financial Assistance for America’s Small Businesses,” February 7, 2000, no. 00-07, 82 SBA, 

www.sba.gov/financing/fr7aloan.html. 

82 SBA. http://www.sba.gov/financing/fr7aloan.html. 

83 Ibid.http://www.sba.gov/ 

84 Ibid. 

85 SBA, 2000. 

86 SBA News Release, Feb. 7, 2000. 

87 SBAProcedural Notice 5000-572. 

88 Ibid. 

89 SBA. http://www.sba.gov/financing/frprequal.html. 

90 SBA. http://www.sba.gov/financing/frlowdoc.html. 

91 SBA. http://www.sba.gov/financing/frfastrak.html. 

92 NCRC Summary of “COMMUNITY EXPRESS” Pilot, NCRC’s Banker/Community Collaborative 

Council and The U.S. Small Business Administration.
 

93 SBA. http://www.sba.gov/financing/frmicro.html.
 

94 SBA.
 

95 SBA News Release, Feb. 7, 2000.
 

96 http://www.onlinewbc.org.
 

97 SBANews Release, Feb. 7, 2000.
 

98 See http://www.pbs.org/capital/.
 

99 Office of the Comptroller of the Currency (OCC). “Effective Strategies for Community Development
 

Finance.” http://www.occ.treas.gov/cdd/strategy.pdf, http://www.treas.gov/cdfi/. 

100 U.S. Department of Treasury, CDFI Fund Overview,
 

http://www.ustreas.gov/cdfi/internetpdf/overviewfinal.pdf.
 

101 Ibid.
 

102 SBA, http://www.sba.gov/INV/tables/1999/stats/sbicfy11.pdf.
 

103 U.S. Department of Housing and Urban Development (HUD), http://www.hud.gov/progdesc/cdbgent.html.
 

104 HUD, http://www.hud.gov/progdesc/edi.html.
 

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105 Office of the Comptroller of the Currency (OCC). “Effective Strategies for Community 

Development Finance,” http://www.occ.treas.gov/cdd/strategy.pdf, http://www.treas.gov/cdfi/. 

106 U.S. Department of Agriculture (USDA), Rural Development Business Programs, http://www.rurdev.usda.gov/rbs/busp/bprogs.htm. 

107 U.S. Department of Agriculture (USDA), Rural Development Business Programs, http://www.rurdev.usda.gov/rbs/busp/bprogs.htm.
 

108 Department of the Treasury. “Capital Access Programs: A Summary of Nationwide Performance.”
 

November 1999.
 

109 Ibid.
 

110 State of Texas, Department of Economic Development.
 

111 State of Illinois, Department of Business Development. 

112 Philip Angelides, “The Double Bottom Line: Investing in California’s Emerging Markets,”
 

California State Treasurer’s Office, May 2000, p. 11. 

113 Board of Governors of the Federal Reserve, “Report to Congress on the Availability of Credit to
 

Small Businesses,” 1996, p. 25.
 

114 National Survey of Small Business Finances.
 

115 White House Conference on Small Business, U.S. Small Business Administration. “Building the
 

Foundation for a New Century: First Annual Report on Implementation of the Recommendations of 

the 1995 White House Conference on Small Business,” 1996, http://www.whcsb.org/fropen.htm. 

116 Ibid.
 

117 Senate Bill 791, “Women’s Business Centers Sustainability Act of 1999,” Section 5, a) 1., Library of
 

Congress, http://thomas.loc.gov/cgi-bin/query/D?c106:4:./temp/~c1061aPwn9. 

118 1994 Survey of Women-Owned Employer Business, Census Bureau. 

119 Cavalluzzo, Ken S. and Linda C. “Market Structure and Discrimination: The Case of Small
 

Business,” Journal of Money, Credit, and Banking. Vol. 30, No. 4. November 1998.
 

120 Cavalluzzo, Ken S. and Linda C., and Wolken, John, “Competition, Small Business Financing, and
 

Discrimination: Evidence from a New Survey,” November 1999.
 

121 Haynes, George W. and Deborah C. “The Debt Structure of Small Businesses Owned by Women in
 

1987 and 1993,” Journal of Small Business Management. April 1, 1999.
 

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National Women’s Business Council 

ABOUT THE AUTHORS 

GLENN YA G O, Director of Capital Studies at the Milken 

Institute, specializes in financial innovations, financial institutions 

and capital markets. His work includes extensive analysis of public 

policy and its relationship to high-yield markets, initial public 

offerings, industrial and transportation concerns, and public and 

private sector employment. 

Dr. Yago’s most recent projects include Emerging Domestic Markets 

— U.S. markets whose entrepreneurs belong to groups such as 

minorities, immigrants and women, and whose access to capital to 

grow their companies has traditionally been limited. He recently 

authored “The Minority Business Challenge: Democratizing Capital 

for Emerging Domestic Markets,” with the Minority Business 

Development Agency of the U.S. Department of Commerce. 

His Capital Studies group established the Milken Institute Capital 

Access Index. He is also engaged in projects promoting peace in the 

Middle East through financial innovations and economic 

development. He is a co-author of the recently published 

Restructuring Regulation and Financial Institutions. Dr. Yago received 

his Ph.D. from the University of Wisconsin, Madison. 

REBECCA FORD is President of Istonford Corporation and directed 

the research for this report. She received her J.D. from the University 

of Chicago. 

JUDITH GORDON is the Milken Institute Editor and received her 

J.D. from Wayne State University. 

October 4, 2000 

65



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