The Gender Differences Among SME Owners

Information services and analytics company Experian has revealed finds of a new study that explored the differences in payment behavior and credit management by male and female small business owners.

While Experian notes that its findings do not necessarily represent national averages, the company discovered significant differences between SMEs run by males and females that could offer insight into how these businesses operate.

Regarding business type, Experian found that the top three types of business run by men are general contracting, business services and real estate. The research found that 44.8 percent of male business owners surveyed run their operations from their home.

For women, the top three are business services, beauty shops and retail stores. More women then men were found to run their business from their home, with 48.3 percent of female business owners doing so.

The research also found differences between the financial size of these companies, revealing that more male-owned SMEs experience higher sales than female-owned SMEs. According to the data, nearly one quarter of male-owned businesses experienced sales of more than $550,000, while 14.5 percent of female-owned businesses reported the same.

Regarding income, 21.2 percent of male SME owners reported a personal salary of $125,000 or greater, whereas only 17.4 percent of female SME owners reported this income.

Credit Management

According to Experian, exploring company credit profiles can offer powerful insight for these business owners, as strong credit profiles are crucial to accessing the working capital they need.

“Maintaining a positive credit profile is a powerful piece of advice for consumers and business owners, regardless of gender,” Experian Director of Consulting and Analytics Peter Bolin said. “Having good credit can make a difference in getting access to funds to help your business grow.”

The average commercial credit score for female-owned SMEs is 34, the data showed; for men, it is 35. Regarding consumer credit scores, the average for female small business owners is 689, where as for male small business owners it is 699.

The research also found that 18.5 percent of female SME owners have at least one commercial trade account, and more than 25 percent have between 10-19 open tradelines on their personal credit file. For male SME owners, 22 percent have opened at least one commercial trade account, and just 17.5 percent have 10-19 personal tradelines open.

Payment Behavior

Significant differences between how male and female SME owners repay debts were also found by Experian’s research. Female small business owners averaged bill payment 8.4 days past due date, where male small business owners averaged just 8.1 days past due.

Experian also found similar findings regarding delinquent invoices. In the last 24 months, female SME owners had an average of 1.3 personal accounts become delinquent – 90 days past due – while male SME owners averaged just 0.9 delinquent accounts.

Concerning Conclusions

According to Bolin, some of these statistics pose concerning revelations regarding the differences between male and female small business owners, especially as positive credit profiles and consistent repayment behavior is crucial for SME owners to access working capital.

“Without access to this capital,” Bolin said, “it forces business owners to fund their enterprise through personal loans, which could put their personal credit at risk if the business struggles,” he said. “This is especially troubling for women-owned businesses, as our research shows their credit scores are lower and take longer to pay their bills than their male counterparts.”

But these findings, Experian said, should also offer valuable insight for business owners to help both male and female business owners improve their business operations.

Darla Beggs, who serves as the national board chair for the National Association of Women Business Owners, reflected on Experian’s research and its implications for the community of female-run SMEs. “The majority of NAWBO members are small-business owners, and access to capital to start or scale their businesses is often an obstacle to their success,” she said, adding that she hopes the study “brings increased awareness to the connection between credit scores and access to capital, and we will work with our members to educate them on the benefits of good credit management.”

The research reveals valuable insight for lenders, too. “By understanding a business owner’s credit behavior and demographic and firmographic information,” Bolin said, “lenders will be able to gain deeper insight in order to take appropriate action when making a lending decision or marketing to prospective clients.”