Women may have come far in business. But they still have a long way to go when it comes to accessing capital. Consider a recent study by the Washington-based National Women’s Business Council, which suggests women rank behind men in the accessible bank credit available to them and far behind in access to venture capital.
What gives? It all comes down to character, suggests Brad Forsythe, president of Milford, Ohio-based risk-management consultancy Best Practice Advisors. Lenders typically use math driven metrics such as capacity, capital, collateral and conditions to score the risk in any financial transaction, says Forsythe. But it’s the subjective “Fifth C” — character — that often poses a stumbling block for women — saying much about many lenders’ false preconceptions of a businesswoman’s ability to repay a loan or deliver value. “The result,” says Forsythe, “is that you still have to be a bit better than a man to get the same loan.” Luckily, he adds, “for most women, that’s not that hard.”
Here are Forsythe’s strategies for winning your loan or VC investment:
Maximize your personal professionalism: First impressions count greatly, so “you’ve got to have a demeanour about you that shows confidence, that shows a winner,” says Forsythe. From dress to deportment, from business cards to polished shoes, be the consummate professional. Always assume that every move you make will be scrutinized more heavily than a man’s.
Perfect your pitch: You’ve got about 30 seconds to grab a lender’s attention, says Forsythe, so tell your story quickly and compellingly. Communicate the big picture of your business plan, what will happen after you receive the loan, how you know it’ll work and why you’re passionate about doing it. “If you get them hooked in 30 seconds, that gets you about another three minutes of attention time,” he says. Using that time effectively may win you a coveted half hour.
Build a support team first: Investing in financial and legal expertise before you seek capital can help you challenge and perfect your business case and presentation. It also lets the lender know that you can build and lead a strong team, aren’t naÃ¯ve, and have filled holes in your business plan by addressing the foreseeable risks, says Forsythe: “Unless you’re a rare human being, you probably don’t have all the business expertise to cover all the areas effectively.” Helpful advisors may include an accountant, lawyer, insurance broker, tax expert and experienced business mentor.
Rely on your team to fill out the lender’s application: “For bigger loans, asking the bank for help with the application will likely kill your opportunity,” says Forsythe. Besides, your support team can often provide more well rounded expertise than a bank’s loan officer. And asking the lender for help says you can’t figure this stuff out yourself. Plus, says Forsythe, the bank’s loan approval analyst might scrutinize applications filled out by loan officers more closely, since officers often receive a bonus for putting through a successful application.
Network, network, network: “It’s so hard to score big when nobody knows who you are and nobody has any preconceived notion of you that says ‘quality, substance, take this person seriously’,” says Forsythe. If you don’t have direct contacts at a bank or VC firm, network to find someone who can introduce you, he adds: “Never make a cold call if you don’t absolutely have to.”
Cut your risk: “Embrace a simple management process that makes [your] business more attractive to lenders,” says Forsythe. “Lenders are quick to spot and avoid risky operators. Instead of launching a crusade against every conceivable risk your business faces (because “you’ll fail before you even start,” he says), start by tackling the top two or three risks that are likely to shut your business down. “I believe that the average company can take care of about half its risk with four pieces of paper,” says Forsythe: a standard customer agreement; a supplier agreement; an employee contract; and a non-disclosure agreement, which is useful for mitigating the risk of strategic partnerships or for visiting consultants.
© 2005 Susanne Ruder