Initial Funding of Female and Male Small Businesses

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Initial Fundingof Female and Male Small
Businesses

• Nicolette Michels
• PROWESS MAKING WAVES CONFERENCE
• November 2003

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Oxford Brookes University

• Business School Enterprise Centre
• Applicability to regional/national economy
• Gateway between university, business industry
• Enterprise and entrepreneurial culture
  development research, education, consultancy
• Diversity Enterprise disadvantaged/excluded
  groups (women, over 50s, young people, ethnic
  minorities)
• IIMB, NOW, SRB East Oxford Action

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Regional Enterprise Initiative
Business Boffins Ltd Business School Enterprise
Centre
Small Business Start-up and Sustainability
Support Pilot Programme 12 month, SEEDA funded
S3
M2SB
On-Line Weekly Modules
Trouble- Shooting Business School Professionals
Mentors
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Sample Characteristics
152 New Businesses
Sector LT33 IT32 Bio25 Agri6 Electronics
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Type Limited 52 Sole Trader 25
Gender Male 67 Female 33

• Representative of South East economy (high tech)
• Higher proportion of women than nationally (26)

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Action Research

• 15 month period
• Data Collection at three stages
• Business Start-up
• Mid-Year Forecast (6 months)
• End of Year Review (12 months)
• Innovative Multi-Method Approach
• Quantitative Facts What? (Questionnaires)
• Qualitative Opinion,Perception Why?
  (Interviews)

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Meeting Research Priorities

• Access to financea particular issue for women
• Statutory strategies for womens enterprise
  (Dti/SBS)
• Research into role of demand for finance as a
  constraint
• Disaggregated data of male and female business
  owners
• Cumulative research over time
• Outcomes of regional support initiatives
• Small Business Finance, comparative studies (Read
  98)
• Representative samples larger, regional,
  cross-sectoral (not 90 retail/services).
  Unequivocal evidence.
• Issue of womens confidence and risk aversion

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M2SB Research Study

• Interim, provisional findings
• Start-up and Mid-Year (6 month) forecast
• Questionnaires
• Quantitative data facts (what?)
• Use of finance sources by male and female
  business owners
• Types and numbers of sources used
• Perceived personal risk

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Questions

• How do you intend to/did you finance the
  start-up of your business? (Start-up stage)
• How are you funding the shortfall between
  domestic monthly outgoings and what you pay
  yourself from the business? (Mid-year Stage)
• Personal Savings Loan family and friends
• Grant Second Mortgage
• Bank Loan Bank Overdraft
• Selling Equity Other

Personal Savings Loan family and
friends Grant Second Mortgage Bank Loan Bank
Overdraft Selling Equity Other
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Findings 1

• Use of internal sources
• Over 50 of businesses used personal savings
• Personal savings outweighed others (Grant 26)
• No other sources used by more than 18
• Pecking Order Hypothesis (Myers 84) broadly
  applicable but
• Greater use of bank loans (16) over internal
  sources such as friends and family, (14)
• Equity used as much as bank overdrafts (12)

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Findings 2

• Proportions of funding sources by gender
• Different proportions of male/female using
  different sources
• But differences between genders not significant
• (Chi Square significance testing values all
  gt0.05)
• No female extreme version of POH (Read, 98)
• Slight shift between start-up and mid-year stages
  but not statistically significant

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Proportions by gender
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Findings 3

• Number of funding sources used
• No significant difference in (mean) number of
  funding sources used. Females have not used a
  greater number of finance packages (Read 98)
• 1.6 sources used by males and females at start-up
• 1.2 and 1.5 sources used by males and females
  respectively for funding shortfall at mid-year
  stage

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Findings 4

• Perceived personal exposure
• To what extent do you feel personally exposed?
  
• (not at all heavily)
• No significant gender difference in extent of
  perceived personal exposure
• (Chi-Square values 0.616 and 0.961 at start-up
  and mid-year stages)

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Conclusions 1

• No significant gender differences at this stage
  in use of finance sources with a larger,
  cross-sectoral, regional sample
• Contradicts previous assumptions research that
• Women use personal sources more than men
• Women use a greater number of sources
• Women perceive more risk than men

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Conclusions 2

• Possible reasons for unexpected research
  results
• South East women-friendly enterprise
  regionsocially expected not just acceptable..
  but not encouraged (GEM)
• Positive impact (Dti/SBS) of
• mentors and role models
• appropriate business advice
• increasing awareness marketing of finance
  options
• Sample characteristics sectors
• Knowledge gap? Unwitting risk-taking by women?
  Mismatch between perceived and actual risk?
  (Watkins Watkins, 86)

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Recommendations

• Qualitative Data (reasons/variables/impacting
  factors)
• Policy-makers/business support providers data
  analysis
• Supply Factors e.g. discrimination (perceived or
  actual)
• Demand Factors e.g. self-confidence, knowledge,
  networks
• Consider other/alternative disadvantaged
  variables?
• Age
• Educational/professional background
• Caring responsibilities
• Financial dependency
• Business location