NEW YORK (Reuters) - A company is more likely to be denied funding and considered a higher credit risk if it is headed by a woman, according to a Federal Reserve report published on Thursday that shines some light on the so-called gender gap among small U.S. businesses.
The 2016 survey showed a somewhat self-reinforcing cycle of women facing higher hurdles than men in not only securing loans but also in increasing profits, revenues and number of employees.
Authors of the report by the U.S. central bank’s New York and Kansas City branches said it could help explain why the performance of majority women-owned companies has lagged in recent years, even while their numbers have grown much faster than businesses run by men. One-fifth of U.S. companies had female bosses in 2015.
The findings could improve “efforts to help high-potential women-owned firms meet their financing needs and flourish,” said Claire Kramer Mills, a New York Fed assistant vice president who co-authored the report, which focused on businesses with fewer than 500 employees.
Among the starker gaps, only 47 percent of women-owned companies that recently applied for loans received them, compared with 61 percent of those owned by men, even while both groups sought funding at a similar rate. Some 48 percent of low-credit-risk companies run by women received all the funds requested, compared with 57 percent for men.
The results suggested discrimination might be at play both externally and internally. Among newer companies, 53 percent of those run by women said their credit risk was medium to high, versus 40 percent for men.
The disparities across credit, collateral, and business performance could reflect, in part, that companies run by women tend to be newer and focus on less capital-intensive industries, such as education and health care.
Still, the gender gaps in revenues and profits did not narrow even with older businesses, according to the report.
The survey reflected responses from 15,991 small companies, 2,880 of which were run by women.
Reporting by Jonathan Spicer; Editing by Lisa Von Ahn