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Debt funding and the surprising impact of gender

Through analysing Capitalise data and that which is publicly available, we explore the impact of the gender imbalance in funding support.

Adriana Amato Mar 09, 2020

To put things provocatively - why are women so apprehensive when it comes to encouraging effective management of debt when running a business? When it comes to debt management, there is much more than female accountants can do to support their clients.

 

Let us take a step back.

 

We all know that there’s no gender parity in business. We know that we need more women on boards. This is not news. We’ve been talking about this for many years. What is not established is the impact of gender and gender imbalance for women advising businesses.

We pulled together information from publicly available sources to create an arithmetic persona of the population of accountants across the finance-heavy counties in the UK. 60% of these were male directors, with an average age of 50. The remaining 40% were made up of female directors with an average age of 43.

We analysed the partners who are using Capitalise. Only 8.5% are female.

While 40% of accounting firm directors in the UK are women - they are clearly not represented when it comes to advising SME clients on lending.

Interestingly, businesses that have a female accountant are significantly more likely than those with a male accountant to receive funding. This is likely because women accountants wait until the business is extremely strong before they suggest the need to seek funding to grow.

Debt is fundamental to growth. Whilst this can be controversial, it is a misconception that debt is a dirty word. Having access to funds can make a fundamental difference between a business remaining comfortable, but stagnant, and its explosive success. While lending may be perceived as risky, the risk can be negated when working with support from a financially literate, regulated accountant.

However, our data indicates that men dominate when working with clients to obtain funding. In fact, 92% of our accounting partners are men. Surely there is no bias that suggests that clients of female accountants have deeper pockets than the clients of male accountants. So, if 50% of businesses need debt funding, where are all of their female accountants? These numbers do not add up.

Is it biological? 

 

It is common knowledge that women and men have a different attitude towards risk. Columbia Threadneedle Investments state that, “Studies have shown that when it comes to assuming risks, men’s brains are more geared towards risk-taking. Male brains actually experience a bigger burst of endorphins when faced with a risky or challenging situation.”

Men tend to take on more debt, use all of it, and not seek advice when they encounter difficulties. Women, however, take a lower amount of debt, try not to use it and, when they struggle, will seek advice.

Extrapolate this, we need female accountants to get comfortable with debt - not only to help other women grow their businesses but also help men avoid the traps!

 

Funding as a force for good 

 

Let’s get comfortable with risk – by knowing what options are available, which ones are most suitable, and which ones are most affordable.

If we, as women, are offering our advice our clients will lose out external support which is grounded in a strong understanding of their business - instead, they will rely on rhetoric by friends, colleagues, gut feel and random google searches.

 

 

 

We need more women in funding 

 

According to the Women’s Business Council, “Equalising women’s productivity and employment to that of men’s levels has the potential for an increased gross domestic product of 35% in the UK.

This could be equal to an additional (almost) £600 billion to our economy. This much money could clear a third of our national debt.”

We don’t just owe it to our clients, to get comfortable with the uncomfortable. We owe it to our country.

 

Key takeaways

 

THERE IS A GENDER IMBALANCE IN SUPPORTING CLIENTS TO GET FINANCE

50% of small businesses need funding, yet only 8% of businesses are supported by a female accountant to do their research, application and management of the financial solution. Men are more comfortable supporting their clients with funding.

THERE IS A GENDER IMBALANCE IN SUPPORTING CLIENTS TO GET FINANCE

Male business owners tend to take on more debt, use all of it, and not seek advice when they encounter difficulties. Women, however, take a lower amount of debt, try not to use it and, when they struggle, will seek advice. It is imperative that more female accountants engage in this aspect of business advisory work.

DEBT IS NOT A DIRTY WORD

Female business owners may need debt to grow their business to its potential and to have the confidence to obtain funding and manage it effectively. Male business owners tend to need support around managing debt.

BUSINESSES ARE AT A DISADVANTAGE

Finance is needed for growth and we are doing a disservice by not supporting our clients in this quest to find funding. 

 

Keen to learn more about where the industry is heading relating to business finance, book in a time slot and one of the team will catch you up. 

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