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TOWARD EQUAL ACCESS: THE FISCAL STRENGTH AND CREDITWORTHINESS OF WOMEN-OWNED ENTERPRISES
Deborah Cain Good (1)
Larry Mielnicki (2)
(1) National Education Center for Women in Business
Seton Hill College
Murray Hill, NJ 07974
(2) Dun and Bradstreet
1 Diamond Hill Road
Greensburg, PA 15601
One of the greatest challenges faced by the business owner in the start-up and on-going management of the entrepreneurial firm is access to financing and credit. Recent research in this area suggests this problem may be exacerbated for the woman business owner (Hisrich & Brush, 1984; Olm, Carsrud & Alvey, 1988; Aldrich, 1989; Hurley, 1991; and NFWBO, 1994). However, as Riding and Swift (1990) note, the financing obstacle faced by women business owners may be a largely perceptual one based upon their subjective perspectives, since limited empirical work has been completed on this issue (Chrisman, Carsrud, DeCastro & Herron, 1990).
This study is designed to assess the creditworthiness and comparative financial strength of women-owned businesses. Currently, there are an estimated 7.7 million women-owned businesses in the United States, generating $1.4 trillion in sales. As such, women-owned businesses have a marked impact on the national economy. Yet, women continue to report difficulties with their financial institutions. One potential difficulty will be addressed in this study -- that of the fiscal health of women-owned businesses.
This study will address the following questions:
1. What is the comparative creditworthiness of women-owned businesses vis a vis all U.S. firms?
2. Given the industry sector, what is the comparative creditworthiness of women- owned businesses vis a vis all U.S. firms?
3. Given the geographic sector, what is the comparative creditworthiness of women-owned businesses vis a vis all U.S. firms?
4. What is the comparative financial strength of women-owned businesses vis a vis all U.S. firms?
5. Given the industry sector, what is the comparative financial strength of women- owned businesses vis a vis all U.S. firms?
6. Given the geographic sector, what is the comparative financial strength of women-owned businesses vis a vis all U.S. firms?
A subset of Dun's Market Identifier (DMI) file will be used for this study. The DMI was filtered to exclude non-headquarters establishments so as not to double count firms. Also excluded were certain Standard Industry Classification codes pertaining to non-profit organizations such as museums and hospitals. In total, the database for this analysis will contain nearly 8.5 million firms with over 800,000 identified as woman-owned or managed. The definition of woman-owned is that a female is identified in any of the following positions: President, Owner, Co-owner, Chief Executive Officer, Chairman of the Board, and Partner.
Three indices will be used to analyze the data. All indices have been developed by Dun & Bradstreet. This first is an index of financial stress. It is a statistically modeled measure indicating the likelihood of a business experiencing financial difficulty in the next 18 months.
The second index is a statistically derived measure of Standard Credit indicating the likelihood that a firm will be delinquent within the coming year in paying bills. The final index is a dollar weighted numerical score indicating a firm's payment performance.
This study will provide empirical data for use by public policy makers, women's groups and financial institutions. Many misconceptions currently exist as to why women rely so heavily on multiple sources for capitalizing their businesses including such short term credit measures as credit cards. If the results of this study indicate that women-owned firms are not as fiscally strong as other firms, then there is justification for the banking industry to make securing a loan difficult for women business owners. If, however, the opposite is true, lending practices and public policy initiatives must be re-examined.