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Are Women Entrepreneurs Putting Their Personal Credit at Risk?

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As small business owners, we all want our businesses to survive and thrive. Sometimes, that means making personal sacrifices. But a new study [1] by Experian reveals that women business owners may be making too many sacrifices when it comes to their personal finances — and it’s putting their personal credit ratings at risk.

The study of both male and female business owners examined both business and personal credit data, then analyzed the differences between the credit profiles of the men and women entrepreneurs. Here’s what they found:

What’s behind the discrepancy? Women entrepreneurs in this study were most likely to own and operate businesses in these six industries:

Men were most likely to own and operate businesses in these six industries:

Although there is a lot of overlap here, general contracting and real estate businesses may be more likely to generate larger sales than the typical businesses run by women. Women-owned businesses typically generate lower revenues: Only 14.5 percent have sales of more than $500,000, while 24 percent of men-owned businesses do.

In addition, women-owned businesses pay their bills 8.4 days past due, while male-owned businesses pay theirs an average of 8.1 days past due.

Women’s more limited access to commercial credit is reflected in the study. Just 18.5 percent of women-owned businesses have one or more open commercial trade accounts, while 22 percent of men-owned businesses do.

As a result, women are more likely to turn to their personal credit to finance business operation and growth. Over 25 percent of women entrepreneurs have 10 to 19 tradelines open on their personal credit files; just 17.5 percent of male business owners do.

Women are also more likely than men to have delinquent personal credit accounts. In the last 24 months, women entrepreneurs had an average of 1.3 personal credit accounts become 90 or more days past due, compared to an average of 0.9 for male entrepreneurs.

What gives? When women business owners can’t get access to capital and credit they need through commercial channels, they’re forced to turn to their personal credit to keep their businesses running. This can be risky, affecting your ability to pay off personal obligations and ultimately hurting your personal and business credit rating.



What can you do if you find yourself in this bind?


Businesswoman [2] Photo via Shutterstock