SECURING the finance needed to start or expand a business can be an uphill battle for entrepreneurs. However, the added challenges faced by businesswomen are unique.

Although the Small Business Service estimates that about 15 per cent of businesses are owned by women, generating £130 billion of turnover, new research reveals that the undercapitalisation of ventures led by women impedes the growth of the economy.

Susan Marlow, of De Montfort University, Leicester, an author of the study, said: “Women-owned businesses are undercapitalised, which leads to underperformance. When innovation is stifled the economy ultimately suffers.”

Preliminary findings of the study, released by the Association of Chartered Certified Accountants this week, are that women-run start-ups begin with lower levels of capitalisation, have lower ratios of debt finance and are less likely to access private equity or venture capital. Dr Marlow said: “The study highlights the untapped potential of women in the marketplace. Only 15 per cent of small firms are women-owned. This figure has not changed over the last 13 years.

“Most of women’s businesses are in the service sector, which receives low income and credibility. Only when women start moving into higher-profit areas — higher-end manufacturing, IT, biomed and law — will they be elevated in the economy.”

Women-owned businesses begin with £6,000 start-up capital on average, compared with £18,000 for men. Dr Marlow said: “Women’s businesses don’t grow as rapidly as men’s because they receive only one third of their start-up capital — a rate that has remained static from 1998.”

However, the study suggests that there is a sufficient supply of finance available to remedy any such discrimination. It argues that women are risk averse and do not demand greater amounts of capital because of lack of confidence, personal capital and time — the latter because of family responsibilities.

Such arguments are rejected by Gita Patel, head of Trapezia, an investment fund that targets women-led enterprises. An “old boys’ network in business still prevails” and blocks women’s access to finance, Ms Patel says.

She said: “Of the €3.5 billion (£2.4 billion) venture capital invested in Europe in 2004, only 2.5 per cent was invested in women entrepreneurs.

“Everyone suffers when starting up, but women suffer more. Women don’t have equal opportunities to access finance while the old boys’ network still prevails. Investors have a tendency to invest in businesses they are familiar with. Up to 95 per cent of business angels — (wealthy private investors) — are men who tend to only understand technical start-ups, while women’s ideas are often in the service sector. Additionally, many deals happen at places women are unlikely to frequent, like golf clubs.

“Fortunately, the UK is slowly starting to recognise this untapped sector. Over one million companies turning over £1 million in the UK are owned by women. Women businesses are the fastest-growing sector. But to say that women aren’t asking for similar amounts of money is not correct.”

When Deborah Jean Farace started Unlisted London, which provides home-delivered skin and beauty treatments, in 2002, finding finance took longer than she had expected. Several potential financiers rejected her attempts to raise £1 million.

“I went through every traditional route to raise seed capital, but few investors understood the concept,” she said.

“Since people tend to only buy into concepts they are familiar with, raising funds took months longer than I anticipated and almost killed my growth.”

However, after dozens of interviews, she raised the backing that she needed and now has more than 4,000 clients who each request treatments six times a year on average. “I had to create my own leads, I didn’t find my way through the traditional system,” she said.

Erika Watson, executive director of Prowess, the trade association that helps women to start and expand businesses, says: “Women are set to change the face of enterprise. They are at the forefront of new sectors and employing new ways of working. Getting more women into business is widely recognised as the most important issue for UK productivity.

“Our economy is set to lose out if banks and business- support providers don’t catch up with this trend.”

If government agencies, investors and banks can address this issue, women’s business ownership will not only continue to grow, but will thrive — along with the economy.

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