Banks shun female entrepreneurs

Women running their own small business are charged more than men for borrowing the same amount of money from high street banks, a new study has found.

A year-long project by Warwick Business School shows the majority of female-run small enterprises pay one percentage point more for their cash, than their male counterparts.

Mike Young, a former specialist with the Bank of England, which has endorsed the research, said the bias is “intriguing”, adding that the subject “needs further research.”

Not only do banks seem to deal with female entrepreneurs as an entirely different customer, the one percentage point effectively translating into £1,000 on £10,000 of borrowings, they also treat ethnic minorities to unique policies.

Yet in this instance, the banks bin the tight-fisted approach and according to the research, lend more favourably to ethic minorities than they do to white male or white female entrepreneurs.

For all bank customers, it emerged that possessing a combination of some financial understanding with a little market research proved to be the most valuable assets for raising the highest funds.

Conversely, using the government’s Business Link website, or other state-run schemes, to find out how to secure a large loan was discovered to be a waste of time for the 2,500 firms surveyed.

The majority of entrepreneurs also feel they have little choice about which bank to use, while a further 20 per cent admitted to leaving their branch disappointed with less money than they wanted.

Mostly this was due to poor credit history or an absence of assets, with one in 10 entrepreneurs saying they were completely unsuccessful at securing a loan.

The study, backed by a consortium of 13 private and public sector organisations, showed Natwest, HSBC, Lloyds TSB and Barclays control 80 per cent of the SME market in England and Wales.

Ian Mullen, chief executive of the British Bankers' Association, welcomed the report claiming his members would use it to improve the services they offer small companies.

“Banks are keen to serve their small business customers well, and finding out more about their needs can only help. I look forward to this partnership continuing to work together in the future to better serve the SME market," he said.

However, the Forum of Private Business condemned the bias towards male entrepreneurs, saying unacceptable borrowing represents just one of the poor finance services offered by banks to small businesses.



 

3rd June 2005

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