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Inside the SBA

Inside the SBA

Small business owners often face problems long before they ever even open their doors. They’re often not afforded the same tax incentives and their options are fewer for financing than the larger corporations that are sometimes competing against. But there are a few other statistics, too, that play a role in how well a small business owner fares.

A new Biz2Credit study released last month shows that women have higher operating costs, lower credit scores and as a result of that, they don’t have access to the same types of financing and credit card offers. This is surprising considering it seems women are gaining a foothold on the small business dynamics over the past few years. In fact, small business loans are approved for men when women are unable to secure similar funds. The approval rates for men are between 15 and 20% higher.

Rohit Ahora, CEO of Biz2Credit explains,

Women tended to be more involved in retail operations, which generally have higher operating expenses and smaller margins. This may also account for their lower credit scores. Banks look at these figures and thus find women-owned businesses more risky to fund, which accounts for the lower loan approval rates for women.

Federal Roadblocks

But there’s a lot more to this, too – for both men and women. It’s no secret small businesses struggle, especially in their first years. Turns out, federal regulations may be playing a significant role in that. The annual cost of federal regulations in the United States increased to more than $1.75 trillion in 2008; this equates to $15,586 for every single American. It’s the distribution that’s so alarming. To say it’s uneven is an understatement. The portion of regulatory costs that fall on businesses was $8,086 per employee in 2008. Meanwhile, small businesses, defined by the government as firms employing fewer than 20 employees, carried the heaviest federal regulations burden. In late 2008 – the latest numbers available – small businesses face an annual regulatory cost of $10,585 per employee. This equates to a 36 percent difference than the regulatory costs that larger firms face. In this instance, larger firms are defined as those with more than 500 employees.

These results have been consistent in a number of separate studies, as well, including one from the Small Business Administration. Because the costs factored in regulatory compliance tend to be fixed, it’s clear that the smaller the business, the heavier the burden. Remember, fixed costs are the same in any business – whether there’s one or one thousand employees. Larger firms are better able to spread out the costs and have different options than a typical small business owner. Worse, those costs, though fixed, tend to be hidden. There are so many government regulations that are factored in, along with economic considerations such as costs, prices, profits, losses, wages, insurance and taxes, that it’s impossible for most small business owners to comprehend how they truly factor into their bottom line. In fact, the government, in its report, states,

Isolating the contribution of regulations to one’s daily routine requires more than simply looking at the sales receipts, for example, as in the case of government sales taxes. A comprehensive list of regulatory influences that affect one’s daily existence is indeed extensive and overwhelming to track or sum up.

It begins to make sense that so many small business owners are defeated long before they ever even make their first sale.

More Findings

Other findings from the Biz2Credit survey includes:

  • Women owned small businesses average 15% lower annual profits than their male counterparts.
  • Women owned small businesses also have operating expenses that average 21% higher than male owned companies.
  • The average credit score for women small business owners is typically 40 points lower than those companies owned by men.

This is often a problem for women who apply for business credit cards, too. Because they’re sometimes at a disadvantage coming out of the gate, it often means they don’t meet the credit criteria set forth by credit card companies. That’s not to say, however, there aren’t strong credit card offers for small business owners – men or women – who are looking to shore up their finances. American Express has long since been a fine choice and friend to business owners, no matter the size of their companies.


In fact, for years, AMEX was synonymous with affluence and power. It still has that distinction, it’s just widened its own definition of how those labels work with today’s modern business owner. Qualification efforts have become a bit more realistic in the past few years, partly because of the recession and the affects it had on the collective American consumer. It still reins supreme and its new offers are indicative of why it’s always been – and remains so today – the first choice for many.

Also, surveys have shown that American Express is the first choice for those in business for themselves. It comes down to the customer service, the additional perks and benefits for business owners and the versatility their financial products now offer. Of course, American Express won’t change the frustrating federal regulations, but if more women are able to move forward with a more level playing field, there’s no stopping them. We’re way past the need for that level playing field, too. The co-branded cards are another selling point for the company. Finally, even those who are unable to qualify for those traditional credit cards can now take advantage of any of the company’s new prepaid products.

Business owners have a lot of credit options, especially with their credit cards and banks and of course, Amex isn’t their only option. The point is that no matter how wrong it is or how unfair it is to women, it’s the way it is if you believe the numbers – but there’s not a woman I know who wouldn’t be able to rule the world, cards stacked against her or not.

Are you a small business owner who also happens to be a woman? Have you faced any unfair advantages? How did you handle them? Share your story with us – we want to hear from you.

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