New York City announced that they are teaming up with Goldman Sachs and other companies to offer female entrepreneurs more affordable lines of credit to grow their businesses.
In a release, the city announced a new program called WE Credit that will help 250 women entrepreneurs access lines of credit, which will average $50,000 at below-market interest rates. The city hopes WE Credit will help close the startup gender gap and become a model for others to follow.
“Today in corporate America and in the financial services industry, women do not have a proportionate share of leadership and decision-making roles. When women do not have a meaningful say in which people, businesses, and fund managers get capital, the result is not enough capital ends up in the hands of women,” said Margaret Anadu, managing director and head of Goldman’s Urban Investment Group, told Yahoo Finance in an interview.
Though a new program is known as WE Credit, about 250 women entrepreneurs will have access to lines of credit that will average $50,000 at below-market interest rates. Officials in the city hope that WE Credit will aid in closing the gender gap in startups and be a model for other U.S. cities. The program sees itself,
“As a first of its kind product that provides working capital at below-market rates, in order to support women who wouldn’t have access to the money otherwise.”
The program itself is a part of a public-private partnership with Goldman Sachs’ 10,000 Small Businesses program. This will provide about $5 million to finance lines of credit. Additionally, the company Squarespace is partnering with the New York City Economic Development Corporation and will invest $1 million for a loan loss reserve. This will cover any potential defaults.
Credit solutioner Foundation, will provide the platform for women to access and manage the lines of credit. Annual percentage rates will be below current market rates at 12%.
According to Margaret Anadu, managing director and head of Goldman’s Urban Investment Group,
“It is widely known that in the decade since the financial crisis, the economic recovery has not benefitted all communities and all types of business owners and employees equally. Women, even though they are starting small businesses at a significant rate, fundamentally don’t get the same amount of capital that their male counterparts do.”
Research by NYC showed that 70% of New York-based female entrepreneurs cited that access to capital was their primary challenge. The sad part is that about 50% stated that they only needed less than $10,000 to start their business. The lack of access to funding makes women use their personal credit with high-interest rates.
“To truly become the fairest big city in America, we need to give everyone an opportunity to participate in our economy – regardless of your gender, race or ethnicity,” said Mayor Bill de Blasio.
The new initiative was necessary according to former Deputy Mayor Alicia Glen since “the private sector hasn’t been able to move the needle, when something is not right about a way the market is functioning, it is absolutely appropriate for the government to intervene.”
The study also found more evidence on the challenges facing female entrepreneurship. It suggests that less than 2% of capital goes to female founders and that it is more difficult for female small business owners to receive a small business loan than for males.
“That means something is wrong with the system. Simple as that. We should just call it out,” said Glen.
WE Credit is looking into the future and hoping that this is a step in the right direction. Margaret Anadu, managing director and head of Goldman’s Urban Investment Group states, “When women entrepreneurs get capital and tailored business education that helps them better execute on their business plans, they tend to pay it forward. They tend to mentor other women and do business with other women.”
In corporate America’s top echelons, women are still underrepresented, making this a step in the right direction.
Anadu added that “Today in corporate America and in the financial services industry, women do not have a proportionate share of leadership and decision-making roles. When women do not have a meaningful say in which people, businesses, and fund managers get capital, the result is not enough capital ends up in the hands of women.”
Source: Yahoo Finance