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Advice for Funders from BIPOC Women Entrepreneurs

Mon, 13 Mar 2023 19:56:10 GMT

One of the advantages we have at AFIA DEI Index is being part of The Forum with its network of relationships with women entrepreneurs across the country. In October and November 2022, we leveraged this community to run three focus groups with BIPOC women entrepreneurs. We learned about their experiences in trying to access business funding and their advice to funders for improvement.

This is the second of two blogs about what we learned.

Who participated?

Two-thirds of the participants were located in Eastern Canada, with the remainder distributed between Western and Atlantic Canada. 78% of the participants identified as BIPOC (36% as Black, 7% as Indigenous, 21% as East Asian, 15% as South or Southeast Asian).

What advice do they have for funders?

We asked women entrepreneurs what advice they would give to funders to improve their experiences in applying for funding and increase their access to funding to grow their businesses. Here’s what they told us:

Venture Capital / Private Investors

Many of our focus group participants commented on being invited to pitch to investors, only to learn afterward that they were never eligible for the funding in the first place. They recommend that investors commit to doing research about applicants' ventures prior to scheduling a pitch meeting, and be transparent about which business phase they are looking to invest in.
Women also expressed seeing consistent positive bias towards male entrepreneurs that makes it more difficult for women to get funded. They are asked more 'negative questions' than men, focused on risks or potential problems with their businesses, rather than looking at the market opportunities or entrepreneur's vision. They asked that investors ask the same questions to all business owners and examine business potential with the same criteria.

Supporting Organizations & Government

Several participants stressed the need for more easily accessible grant funding, rather than more training programs. Entrepreneurs, especially solopreneurs, often don’t have the time to take the classes or webinars to receive grant funding. These grants are difficult to get when pre-grant workshops are required and people are disqualified if they don’t attend all sessions.
Other grant requirements, like reimbursing expenses after the fact, two years of financial records, or requiring a certain number of employees, can also create barriers for start-up / early stage businesses.
BIPOC participants also emphasized the need for more consultation in the design of programs and funding opportunities targeted towards them, so that the programs respond to their needs and goals. One woman suggested that grants that allow them to hire external people for useful services such as website development, setting up their Shopify or Amazon account, accounting services, legal services would be much more helpful than grants to hire students for the summer. Another example was to provide entrepreneurs with grants that allow them to pursue business opportunities, such as the costs associated with conferences and trade shows where they have an opportunity to pitch to potential investors or customers.

Funders

Applicants found greater success with funders that help guide them through the application process and take time to understand the business and person behind the application.
Participants suggested that the personal information requested by financial institutions may need review for bias. For example, is marital status relevant for a loan application? Are the gender identity options and titles on application forms inclusive of gender diversity?
Another recommendation was to increase staff diversity so that the lived experiences of BIPOC women entrepreneurs are better recognized.
Women also recommended that if they don’t qualify for a loan, it would be helpful to redirect them to appropriate resources or someone that can help achieve their goal. This would enable the appropriate funding to be allocated.
Feedback on why an application is successful or rejected would make funders into partners or collaborators instead of gatekeepers in the entrepreneurial space.
BIPOC women asked funders to look beyond a person’s personal credit score which can be based on many factors that have nothing to do with their business potential or financial management skills, and focus instead on the business numbers.
In the case of targeted funding (such as Black Entrepreneurship or Women's Entrepreneurship funds), there was a call for increased transparency about investment impact, such as reporting on if the funding is reaching the intended recipients and the impacts on these entrepreneurs and communities.

An insightful recommendation was for granting agencies and lenders to streamline application processes and requirements:

“What I would like to see is instead of us always applying multiple times for these things [financial institutions/funders], there should be someone who can collectively have our general applications and find the funders instead of us having to do it 90 times over. We have to tweak our applications for this funder, then that funder, etc. It’s too much time spent rewriting to fit your box, when there are people hearing that there are people with money who can’t find us.”

AFIA DEI Index was created to address these systemic barriers to financing for women entrepreneurs in all their diversity. By working with banks and other funders who are committed to change, we can shift culture, policies and practices to create equitable and positive experiences for women entrepreneurs and greater access to financial capital to grow their business ventures.

What BIPOC Women Told Us About Access to Business Funding

Mon, 13 Mar 2023 19:46:24 GMT

One of the advantages we have at AFIA DEI Index is being part of The Forum with its network of relationships with women entrepreneurs across the country. In October and November 2022, we leveraged this community to run three focus groups with BIPOC women entrepreneurs to learn about their experiences in trying to access business funding and their advice to funders for improvement.

This is the first of two blogs about what we learned.

Who participated?

What did we learn about their experiences?

Participants were very open and candid about their experiences in trying to access funding for their business ventures, as well as about why they often did not seek funding in the first place.

Here’s what they told us:

Impersonal Processes Result in Exclusion: Many testimonies illuminated the fact that the average funding approval process is quite impersonal and rigid, not allowing for the discretion necessary to properly analyze a business’ capability to successfully repay a loan. Indeed, in many cases, loan applications were entirely online and women were excluded before they even had the opportunity to speak with a person.

Falling between The Cracks: The diverse women indicated that funders often demonstrate a lack of understanding about their type of business, especially if it falls into a hybrid category, has a social purpose, or involves ecommerce. For example, one entrepreneur highlighted that having a social purpose in their business hindered their application process as investors wanted a return rate that she could not achieve while paying her employees a living wage. Ultimately, she was able to find investors whose values aligned with hers, but indicated that this was a difficult process. Another indicated that she had created an innovative business that combined a physical product with an accompanying app. As a result, both technology-oriented funders and traditional funders thought her business didn’t fit their criteria as it was not just tech or just product.

Lack of Relevant Information: One area that causes a lot of confusion is where to go to get funding and what types of funding are available. Participants* shared that this is not knowledge that is available in their communities, and that the funders provide complicated information that is hard to understand. They often feel uncomfortable asking about funding options as they do not know the lingo or even what questions to ask. Another kind of information lack is around the criteria for loan decisions. There is often little explanation why applications are denied, which makes it difficult to determine what additional steps the applicants need to take to get funding.

One Type of Funding Blocks Access to Another: Participants stressed that receiving grants can create barriers to accessing loans, as traditional lenders would not count this as revenue. A major challenge is the impact of using personal credit to start-up their enterprise, which can lower their credit score and make accessing business financing difficult down the road. Even when approved for business loans, many women indicated that they are wary of taking on loans with high interest rates. Furthermore, having to guarantee loans with personal assets made many participants feel uncomfortable; for others it has deterred them completely from applying for funding.

Onerous & Complicated Requirements: Participants indicated a lack of transparency with respect to funding requirements at various financial institutions. Several Black women mentioned that even when funding is targeted to them specifically, such as Black Entrepreneurship Funds, the requirements and terms are not transparent. An Indigenous woman entrepreneur mentioned that grant funders say that they are there to support them, but then have guidelines that are difficult for a solopreneur to meet, such as requiring the business to have at least one additional employee. This makes scaling the business challenging, as it creates a cycle of ‘needing funding to get funding’.

Opportunity Costs: The opportunity cost of the time spent applying for the many different grants and loans can be quite high, as the application process varies across financial institutions and other funders. Solopreneurs and small business owners are wary of spending time on applications without any guidance or intel about their chances of being funded.

Targeted Funding Unallocated: Several participants expressed concern that BIPOC targeted programs are not actually dispersing funds. They see these as public relations campaigns for financial institutions and/or the government. For example, during an accelerator program meant to move Black entrepreneurs into accessing targeted loans, a participant asked organizers if anyone had received the funding yet from the program, and received a noncommittal response. Other Black and Indigenous women said they didn’t know anyone in their network who had received funds through any targeted program, including themselves, despite applying and thinking they met the eligibility requirements.

Biases: The women participating in the focus groups expressed that there are some inherent biases in approval processes that create gender and cultural-based inequities in funding. One woman found that she was continuously asked about her personal relationship status when applying for business loans; while another found that she was able to qualify for a loan only after adding their husband to the application (which was suggested by the funder). Women expressed concern about being overlooked if investors found out that they were pregnant during a pitch round, despite the fact that many women continue to operate successful ventures while parenting babies and young children. Another woman was advised to add products from other cultures to their line-up, creating frustration that the cultural significance of their products was not seen or respected.

Discrimination: One particularly troubling instance of racial profiling in banks was shared by an Indigenous entrepreneur. They mentioned they have an Indigenous Status Card as their main ID, and it has made their experience at banks very difficult, particularly when they enter the bank wearing their traditional clothing. She said that employees will often call a manager to go through their IDs as well as treat them rudely. Several BIPOC participants also indicated that they know they are considered a higher risk by lending institutions, because they didn’t establish strong credit records when they were young due to historical lack of knowledge and/or relationships with financial institutions in their community.

In the words of one Black participant:

“Until they start giving money out, they’re not going to allow us to start reversing that trend [of weak credit records] because it’s not even giving people the opportunity to try. It also puts us at higher interest rates.”

* It is relevant to note that the conversations were open to discussing all kinds of funding: grants, developmental loans, business loans, lines of credit, and venture capital.

What Keeps Black Women from Sourcing Mainstream Business Loans?

kathryn@kjamarkets.com (Kathryn Ashby) — Tue, 31 Jan 2023 17:10:35 GMT

For many women, self-funding ¹ is a personal choice made to not saddle their business with debt. For Black women entrepreneurs, this is often the only way they can fund their businesses since other options have historically not been available to them.

Approximately 42% of new women-owned businesses in Canada are created and owned by Black women. ² 60% of these entrepreneurs are immigrants of African and Caribbean descent; very well-educated and residing in large urban cities such as Toronto and Montreal. ³ Many Black women also have an inherited “do-it-yourself” mentality which translates into their business outlook.

In a 2021 survey, 81.4% of Black women entrepreneurs used personal financing to fund their business. ⁴ These women turned to credit cards, personal savings, family loans and online and payday lenders where it may be easier to qualify for funding but leaves their businesses trapped in a high-interest cycle of debt.

Yet, these women would know that access to mainstream funding is vital to the growth and long-term sustainability of their businesses, with 78.5% of Black women entrepreneurs citing that financing and the cost of borrowing was a major issue. ⁵ So why are they not accessing the business loans they need?

Here are Five Reasons Why

#1 - The Juggle of Being a One-Woman Operation

Many Black women entrepreneurs build service industry businesses in CPG (consumer packaged goods), artistic, food and hospitality which are extensions of their family businesses and culture. Though often easy to begin with little funding, these businesses are often one-woman operations that struggle to meet the demands of their business as they grow. It is challenging to be “all things” to a business, so while their service quality is high and customer demand is growing, the administrative side may be sidelined.This means that financial records or other paperwork needed for loan applications are not in place.

#2 - Distrust of Financial Institutions

Low trust in banks is widespread for Black communities, based on real-world experiences of bias and discrimination - both personally and among their peers. Many women express a deep seated belief that banks “won’t lend to people like me.” 6 A related challenge is that information about business funding options is not reaching this group. A recent study found that “only 22 percent of Black entrepreneurs knew about the Business Development Bank of Canada or Export Development Canada, despite those organizations offering the largest federally funded programs that support businesses in Canada.” 7

#3 - The Hustle Culture

In many Black communities, the hustle culture is alive and well. You make a product or have a service, sell it, trade it, build out more, gather opportunities from as many ventures as you can and primarily use cash for transactions. As the business grows from hustle through startup to setting up as a partnership or a corporate entity, the hustle skills are not sufficient. Creating a business plan, managing accounting and other financial obligations are often not taught within family/community networks and with limited learning opportunities in secondary school and beyond, Black women are often left to their own devices to source out and learn this information.

#4 - Generational Wealth

As the Canadian population ages, the first wave of Caribbean and African immigrants from the 60s and early 70s are only now starting to see their second generation of children grow into business leaders. In comparison to many other settler groups in Canada who have multiple generations of wealth, the Black community experienced systemic inequalities that blocked efforts to build wealth. There are not a lot of avenues for Black women entrepreneurs to turn to in terms of inherited wealth or the ability to borrow from family to bootstrap their business.

#5 - Culture and Community

The culture of many African and Caribbean communities is very much one of “we do it ourselves” mentality. Many first- and second-generation parents built their own homes and businesses without any financing from an institution. That sense of purpose was born of their inability to often be even allowed into institutions because of their race so it became easier and faster to simply band together as a community to build homes and businesses. Further, many Black women entrepreneurs are often loath to take on debt , concerned about high-interest rates, repayment terms and loan defaults. Even though taking out a low interest loan could enable better growth and long-term financial stability, the concept of good debt vs. no debt is a very strong sentiment in the culture.

Sources :

Self-funding means using funds from personal savings or credit cards and/or borrowing from family and friends
WEKH | 2021 | The State of Women’s Entrepreneurship in Canada
BBPA, Casa Foundation, de Sedulous & WEKH | 2021 | Rise Up: A Study of 700 Black Women Entrepreneurs
4 BBPA, Casa Foundation, de Sedulous & WEKH | 2021 | Rise Up: A Study of 700 Black Women Entrepreneurs
BBPA, Casa Foundation, de Sedulous & WEKH | 2021 | Rise Up: A Study of 700 Black Women Entrepreneurs
Women’s Enterprise of Canada (WEOC), | 2022 | Bootstrap or Borrrow, Improving Access to Financing for Women and Non-Binary Entrepreneurs in Canada
Canadian Black Chamber of Commerce | February 2021 | Building Black Businesses in Canada: Personas, Perceptions & Experiences

Other Resources :
Anne Kniggendorf | May 2, 2019 | The barriers to funding equality persist for Black women.
African Canadian Senate Group | May 2021 | Inclusive Entrepreneurship: Exploring the Barriers Facing Black Entrepreneurs in Canada
Elena de Luigi | May 26, 2021 | Black entrepreneurs in Canada facing systemic racism and other barriers to success, new study finds

Canadian Press | April 15, 2021 | Most Black female entrepreneurs face financing hurdles

Five Reasons Why Women are NOT Getting the Funding They Need

Tue, 13 Dec 2022 21:16:10 GMT

Women are building businesses in all sectors. They are creating jobs, supporting communities and making a significant economic impact — 1.5 billion+ contributed to the national economy each year.

But women entrepreneurs are not getting the funding they need. In fact, while women represent 38% of entrepreneurs in our country, they receive less than 20% of traditional bank financing and less than 4% of venture capital.

The situation is even more challenging for Black and Indigenous women and Women of Colour (BIPOC). A 2021 survey of Black women entrepreneurs found that 58% identified lack of financing as a key obstacle to growing their business. Indigenous women start-up businesses at a high rate, but are less likely to be able to sustain and grow businesses over time, in part due to a lack of accessible, affordable financing.

Here are five reasons why

#1 - Unconscious Bias

WEKH research shows that front-line staff in lending institutions are more likely to ask women about the risks and challenges associated with their enterprises while providing more opportunities for men to talk about their vision and opportunities for business growth. Funders may have other unconscious biases that affect their decision-making, such as ideas about women’s businesses being ‘passion projects’ or a ‘second income for the family.’ Interestingly, both male and female staff and investors exhibit these gender biases. When it comes to venture capital, there is a greater tendency to focus on the content of men’s pitches while assessing women on their presentation style or even their appearance. Indeed, a Harvard study found that investors overwhelmingly preferred pitches made by men compared to pitches made by women, even when the content of the pitch was identical.

#2 - Overt Discrimination

Black, Brown and Indigenous women continue to experience overt discrimination from some funders. A 2022 national survey conducted by WEOC found that racialized women experienced bias or discrimination three times out of ten when applying or pitching for funding. In our own AFIA Focus Groups, a First Nations woman entrepreneur shared her experiences with banking: “If I come in with my moccasins, and beaded earrings, nine times out of ten they will call a manager to go through my IDs and everything else.” A Black woman entrepreneur talked about going into her bank to deposit cheques from business clients and having tellers hold the cheque up to the light to see if it was real, ask for additional pieces of ID, and make comments like: “this is a large amount of money, where did you get it?”

#3 - Sole Proprietorship

A related issue identified by WEKH is that women are less likely than men to incorporate their business ventures. Additionally, they are more likely to operate as ‘self-employed’ when offering professional services, rather than registering as a business. Indeed, while women were majority owners of just under 17% of SMEs in Canada in 2020, they made up 37% of all self-employed people. These patterns have implications for access to commercial loans and venture capital.

#4 - Sludge

A 2022 report by WEOC highlights that women entrepreneurs often experience too much ‘institutional sludge’ when applying for financing, which leads many to stop applying for formal sources of funding. This ‘sludge’ involves the “unnecessary points of friction and disagreeableness in the funding application process.” Women choose to use their valuable and limited time on other business priorities, and rely instead on personal credit (including credit cards and lines of credit), savings, and money borrowed from people close to them. While it is common for entrepreneurs to use their own resources to start up a business, these forms of capital are often insufficient to grow a business. In addition, personal credit puts personal assets at risk and usually comes with higher interest rates, affecting profitability and growth potential.

#5 - Colonial Legacies

Section 89 of the Indian Act prohibits use of reserve land, including family homes, as collateral. The Act also prohibited women from owning or having rights to the family home, a situation which continues to affect the percentage of women who are named on housing titles. In addition, there are few to no financial institutions located on or near reservations, meaning that many Indigenous people do not have opportunities to develop relationships with funders or trust in such institutions. While Indigenous people in urban areas do have greater proximity to these institutions, the distrust remains. Indeed, WEOC’s 2022 national survey found that Indigenous entrepreneurs are “three times more likely to feel that banks would be biased or discriminate in their dealings with them.” Legacies of colonialism continue to affect levels of assets and credit scores for Indigenous and Black peoples in Canada, which also can create barriers to financing.

Sources :

Bobiwash, H. (ed). (2020). Indigenous Women Entrepreneurs in Canada: Summary of National Survey Findings. National Aboriginal Capital Corporations Association (NACCA). https://nacca.ca/wp-content/uploads/2020/07/NACCA-IWE-Survey-Report.pdf
Cukier, W., Ying Mo, G., Chavoushi, Z.H., Borova, B., Osten, V. (2022). The State of Women’s Entrepreneurship in Canada. Women Entrepreneurship Knowledge Hub (WEKH). https://wekh.ca/research/the-state-of-womens-entrepreneurship-in-canada-2022/
Kaplan, S., Menking. A. (2020). Shattering the Second Glass Ceiling: Financing Women’s Entrepreneurial Ventures. Women Entrepreneurship Knowledge Hub, Institute for Gender and the Economy. https://wekh.ca/research/shattering-the-second-glass-ceiling-financing-womens-entrepreneurial-ventures/
Women’s Enterprise Organizations of Canada (WEOC). (2022). Bootstrap or Borrow? Improving Equity and Access to Financing for Women and Non-Binary Entrepreneurs in Canada. https://weoc.ca/site-content/uploads/2022/11/WEOC_Bootstrap-or-Borrow_FINAL-EN.pdf

Meet AFIA – Our Partners Choose Women

Thu, 07 Nov 2019 13:52:47 GMT

Women’s entrepreneurship in Canada has been growing at an explosive rate as more women choose to chart their own career path by working for themselves (1). In 2021, 36.8% of self-employed Canadians were women. Women-owned businesses contribute $150 billion to the Canadian economy and employ over 1.5 million people with a growth potential that could add another $150 billion to the Canadian GDP by 2026 (2).

Yet, it’s a well-known fact that women are at a financial disadvantage when it comes to funding their businesses from the startup through expansion stages. Add in factors such as race and gender-diversity and financing options drop even further.

How do women fund their businesses?

Many women turn to friends and family to self-fund their businesses. 32.6% of women entrepreneurs use personal credit to fund their businesses (3) while only 14% use loans (4). The challenge is that these sources of funding are often insufficient to push these businesses to the next level, or that women are paying high interest rates that cut into their profit margins. When it comes to raising investor funds, 60% of the time funders invest in pitches done by men over women and 90% 5 of venture capital deals in Canada go to companies founded by men (5).

Women’s Entrepreneurship Day (WED)

WED is a global movement to support female entrepreneurs and amplify their challenges. It began in 2014 with a celebration at the United Nations and is celebrated annually on November 19th. Their founding principle is “Choose Women.”

The Forum’s mission is to help women entrepreneurs access the resources and community they need to thrive in business. WED aligns with our values and commitment to our community. We choose women. We always have.

Who will choose women? Meet AFIA.

The Forum is collaborating with funders such as the banks, credit unions and diverse entrepreneur groups to develop a package of resources and services to address the systemic barriers that women entrepreneurs face when accessing business funding.

AFIA DEI Index is the First of Its Kind nationwide initiative to accelerate Diversity, Equity, Inclusion (DEI) and Reconciliation in business funding. AFIA is especially focused on business funding access and inclusive customer service for Black and Indigenous women and other Women of Colour (BIPOC), and people with diverse sexual orientations and gender identities (2SLGBTQ+).

Our goal is to help realize the full potential of women entrepreneurs across Canada with the funding they need to thrive.

Funders who #ChooseWomen

The funders who are collaborating with The Forum to build this Index have decided to choose women. They have made a conscious commitment to make funding for women entrepreneurs a more equitable process. They realize that the future growth of their business comes from backing women, in all their diversity.

By choosing to invest in women entrepreneurs, funders can find benefits in new untapped markets, expanding their client base and improving their own bottom line by investing in a woman-owned business that grows into the next big thing or simply provides a solid ROI. Funders will also reap the goodwill engendered by better serving this underrepresented market.

References :

Statistics: https://wekh.ca/data/

0d9a48bb

Advice for Funders from BIPOC Women Entrepreneurs

Who participated?

What advice do they have for funders?

What BIPOC Women Told Us About Access to Business Funding

Who participated?

What did we learn about their experiences?

What Keeps Black Women from Sourcing Mainstream Business Loans?

Here are Five Reasons Why #1 - The Juggle of Being a One-Woman Operation

#2 - Distrust of Financial Institutions

#3 - The Hustle Culture

#4 - Generational Wealth

#5 - Culture and Community

Five Reasons Why Women are NOT Getting the Funding They Need

Here are five reasons why #1 - Unconscious Bias

#2 - Overt Discrimination

#3 - Sole Proprietorship

#4 - Sludge

#5 - Colonial Legacies

Meet AFIA – Our Partners Choose Women

How do women fund their businesses?

Women’s Entrepreneurship Day (WED)

Who will choose women? Meet AFIA.

Funders who #ChooseWomen

Here are Five Reasons Why

#1 - The Juggle of Being a One-Woman Operation

Here are five reasons why

#1 - Unconscious Bias