No More Male Co-signers: FinTech and the women’s business revolution

How FinTech is enabling financial inclusion

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Just 30 years ago, an entrepreneur like my mom seeking a loan for her business could be required to find a male relative to co-sign her business loan documents. His involvement in the business didn’t matter, just his gender.

That changed with the passage of H.R. 5050, also known as the Women’s Business Ownership Act, in October 1988. The law eliminated the co-signer requirement, established new support for women business owners, and mandated that the government collect more complete information on the state of women-owned businesses.

It might seem shocking that the discriminatory practice of requiring a male co-signer was still in effect so recently. But it wasn’t that much earlier that women even gained the right to open their own bank accounts or their own credit cards. Women taking control of their own financial futures, particularly in the business realm, is a recent development — and this progress can’t be taken for granted.

My mom can remember, down to the minute, the moment when she realized that she would never get what she wanted out of her corporate job just outside Washington, D.C. and decided to go into business for herself. Armed with her public policy PhD, she self-funded and started an environmental consulting company that works with federal and state governments. I was in 5th grade when she made this decision and she still owns that same business today.

When I was growing up, I never realized there was such a thing as a “woman entrepreneur.” There were just entrepreneurs. Business owners. Hustlers. And that’s who I wanted to support when I chose a career for myself. That’s what brought me to my career in FinTech.

We often think about the benefits of FinTech — the term used to describe technology-powered financial services — in terms of increased convenience and speed, cost savings, and better user experiences. But beyond that, FinTech also represents a step forward for financial inclusion. It’s helping to level the playing field for small business owners like my mom in particular, giving them access to capital and resources that were previously out of reach. Here are three ways:

1. FinTech is giving women back their most precious commodity: time.

What I remember most from my time growing up was that running a small business means lots of long hours and hard work. For us, it was a family affair. My childhood was filled with weekends of my brother and I stuffing binders for a big proposal, an occasional Tuesday night Fed-Ex run, and of course non-stop work for my Mom through nights and vacations. Between work and family, my mom just never had a break.

While there are many men who juggle these demands as well, it’s often women — particularly mothers — who must perform a constant balancing act. Women are increasingly serving as primary breadwinners for their families, and usually do so without relinquishing many of their family duties. Women are also twice as likely to act as primary caregiver for aging parents. While flexible and remote work schedules offered by many large companies have helped working mothers, these arrangements just aren’t possible at a small business when you’re the only one running the operations.

Fintech solutions such as Zenefits, Due, and Wave allow small business owners to spend less time on the daily tasks of running their business. This means they have more time to spend on growing their business — or on their families and life outside the business.

2. FinTech is equalizing access to financing.

Once I started working at Funding Circle, a business loans platform, I asked my mom if she had ever considered financing. No, she hadn’t. Like so many other female entrepreneurs, my mom wanted to work with the capital that she had in order to grow her business. Now, she advises other entrepreneurs to take help early in order to meet their growth objectives.

Study after study have documented that women business owners not only ask for less financing than men do, but are approved at lower rates. The financing they do get tends to come at a higher cost. The stats are even worse in the VC world, where female startup founders received just 2% of of the $85 billion total invested by venture capitalists in 2017.

This funding gap makes it difficult for women-owned businesses to grow quickly, or to weather the storm when sales are down. FinTechs don’t just make the process of securing financing easier and faster, but they use gender-blind digital processes that are less likely to be infiltrated by bias. In fact, research shows that in crowdfunding, women are actually better at raising money than men are.

3. FinTech is helping with the hardest piece of the puzzle: Building your network.

Running a successful business takes more than just capital and a great idea. You can’t learn to start a business beforehand, it just happens on the job. And when it does, it comes at you fast. One of a business owner’s best assets is a network of others who are working on the same challenges that they are.

Growing up, my mom was the only female entrepreneur I knew. She wasn’t able to compare business challenges with her friends, most of whom had traditional jobs and didn’t face the same types of issues. Over time she has not only formed a network, but she’s led several networks that help other women find a leg up.

FinTech is stepping in to help women do that faster. Websites like Ellevest exist to form communities around finance just for women and provide plenty of fantastic advice specific to female entrepreneurs. Not to mention, other types of technology platforms like Meetup and Facebook have helped women entrepreneurs make all types of connections with others.

FinTech isn’t a novelty anymore, it’s becoming a central component of our financial system. In doing so, it’s fulfilling its promise to equalize and democratize access to finance. This is great news for everyone, especially America’s 12 million women-owned small businesses.

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