Removing Gender Bias in the Financial Lending Industry
Women have been discriminated against in the business loan industry for as far back as one can remember. There are many reasons gender bias exists even though it would technically be illegal under fair lending laws to deny business financing based on one’s gender. Many private lending companies have been taking the first step in eradicating this type of lending behavior by offering merchant cash advances for female business owners. This article discusses why this stereotypical behavior exists and recent developments in the private lending sector that may change the way women are treated by financial institutions.
Most people today understand how difficult it is to establish proof that discrimination exists on any level. A recent study about gender bias in the lending industry was conducted by a group in Chicago and one major finding was uncovered through a series of interviews with women entrepreneurs. Many of these female business owners applied for a business loan and noted that although bias was not apparent they could sense it “primarily through loan officers’ comments and remarks”. The most common remarks were comments about family plans such as marriage, child bearing and subsequent child care, as well as other well known remarks related to gender that had nothing to do with the applicant’s business acumen or qualifications.
Now although any sensibly minded individual, man or woman, could be easily offended by this type of behavior, the reality is there are some actual data that suggests women put family first. In a study done almost a year ago analyzing the priorities of female business owners the findings suggested that “Women are more willing to put work on the backburner for family”. For argument’s sake if we accept that women business owners do prioritize their families over business, it still does not warrant exclusion from receiving business financing.
Many business owners, whether they are a man or woman, have both pluses and minuses in the way they operate their companies. This article could go on forever extolling the positives women bring to business leadership such as they take less risk, they are better managers of finance as demonstrated in the home, and they are more communicative and personable, characteristics that make a business better. In comparison, there are many studies to show how men are more of a financial risk for various factors. Yet there are dozens of studies that show how women have continually been denied access to capital in comparison to men. Well the merchant cash advance industry has taken an aggressive position on funding women in business and this can have dramatic effects on female business financing in the future.
The reason why business cash advance lenders do not discriminate when approving applicants is because this business loan alternative is based solely on the company as an applicant and not an individual. A business or merchant cash advance is an exchange where the lender provides an upfront payment or lump sump of capital against future account receivables for a fee. Merchant cash advance companies can even offer business loan options to individuals with bad credit because of the lending criteria. It is the flexibility in this financial product that has made it so attractive for women. Many of these providers allow the entire application process to occur online so there is almost no chance that women will be subjected to offensive remarks. Also, these lenders only focus on the business as an applicant so there is no concern with family priorities. It is all about financial performance and this is the way it should be.
If merchant cash advance companies continue funding women it is only a matter of time before banks and other lending institutions have to become more flexible in order to share in the economic pie. These business cash advances will also establish a track record of business loan payoffs that will make it even easier to judge an applicant on their financial merit and not gender status. There are increasing numbers of women entrepreneurs and with merchant cash advance companies as a source of business financing it is inevitable that more and more business loan opportunities will open up for women and gender bias will become a thing of the past.