Carrie Charlick and Marcia Cubitt have $4 million in sales but have been rejected for $500,000 credit lines since 2012. Their 11-year-old company, Essential Body Wear, sells women's underwear at parties at customers' homes. That's a problem for bankers, Charlick says. Because the business, based in the Detroit suburb of Commerce Township, doesn't have a traditional structure and sells directly to the public rather than retailers, banks keep saying no.
"We don't have receivables and we don't own a building," she says. "We don't have collateral."
Male loan officers have also made inappropriate comments about the fact the company sells lingerie. Charlick is convinced that they have a problem with women-owned businesses.
Women owners have long been at a disadvantage getting loans. Some states required husbands or other male relatives to co-sign business loans until the practice was outlawed by the Women's Business Ownership Act of 1988. But women's business loan approval rates are between 15 percent and 20 percent below men's, according to the online lending marketplace Biz2Credit.com.
Several factors contribute to the problem. Banks historically have been gun-shy about small businesses, and that caution increased due to stricter government regulations after the 2008 credit crisis. Often, women-owned businesses are young, making them look risky to lenders.
They don't look as creditworthy as men. Their credit scores in 2013 were on average 20 points below men's, an improvement from 40 points in 2012, but still a significant difference, according to Biz2Credit.
But women owners may also hurt their chances for approval.
"Women don't ask, 'what do I need to do to get ready to borrow?'" says Maria Coyne, head of small business banking at KeyBank.
Many women-owned businesses don't have enough revenue and cash flow to convince bankers they have the ability to handle their debts, says Lisa Stevens, head of small business banking at Wells Fargo & Co. More than two-thirds of women-owned businesses have less than $25,000 in revenue, Stevens says.
Some make a poor impression when they show up at the bank.
"They don't take the time to prepare paperwork. They don't have the proper documents, financial statements," says Frank Gallo, a commercial loan officer at Tropical Financial Credit Union which has locations in South Florida.
Many women can't explain in detail why they need a loan and what they'll use the money for, Gallo says.
The problems may come from a lack of confidence that would allow them to be aggressive about their companies, including getting a loan, says Barbara Kasoff, president of Women Impacting Public Policy, an advocacy group. They shy away from approaching a loan like any other business deal.
"You need to let the bank know you're a good bet and they can invest in you and they can get their money back," she says.
Regulations the government imposed on banks after the 2008 financial crisis have forced them to be wary, KeyBank's Coyne says. The Federal Deposit Insurance Corp. examines banks' credit policies and whether they've deviated from them, then makes a judgment about whether they're being prudent lenders, Coyne says.
Members of the Senate Small Business & Entrepreneurship Committee introduced legislation in July that would make more Small Business Administration loans of up to $200,000 available to women owners. The bill would also allow lenders to give women owners more flexible loan terms.
Stringent terms demanded by one lender forced Alicia Hill to look elsewhere. She needed money for a second Workout Anytime fitness club in suburban Atlanta. Hill applied to her current bank three months ago, expecting her three years of successfully running a club to make approval easy. Instead, the bank emailed her two months later saying she needed to use her savings as collateral.
"It didn't make sense to me. We needed that cash in case we needed to fund the business," she says.
Hill got a loan within weeks from a financing company. She had been wary of financing companies, believing they would charge a higher interest rate. But the rate she got turned out to be only slightly higher than a bank loan. And the company had a more realistic view of her ability to repay the loan than the big bank she had a 15-year relationship with, Hill says.
Individual banks may be resistant to lending to women owners if they don't understand the business, says Rocco Fiorentino, CEO of Benetrends, a North Wales, Pennsylvania-based company that helps businesses get loans. For example, he says, companies that provide massages and other spa treatments.
"If the bank didn't like that category, she might get turned down," Fiorentino says.
Owners should find out before they apply what kinds of companies a bank is likely to lend to, he says.
Women should also get mentoring and advice from accountants, attorneys and other experts before applying, to help make an approval more likely, says Lori Meeder, a loan officer with Northern Initiatives, a Marquette, Michigan business lender.
"The most successful businesses are constantly looking outside of themselves for advice or perspective," she says.
Senate Small Business & Entrepreneurship Committee: www.sbc.senate.gov