A fairer shake for companies owned by women. House bill takes aim at credit and contract discrimination

For years, Eugenie AuKim tried unsucessfully to bid on federal contracts, despite laws that are supposed to set aside a portion of those contracts for minorities and women. ``I finally gave up,'' she says. ``Contracts supposedly set aside for minority business owners were not given out to minorities, and a lot of white companies were getting the funds and the projects'' set aside for this purpose.

Ms. AuKim's duties as owner of the Design Studio, a Southampton, N.Y., planning and design company, include a good deal of touring construction sites sporting a hard hat, a picture that she says her clients and construction workers accept much more readily than the government apparently has.

Her frustration is shared by many like her. Women now own more than 3 million companies, or 30 percent of all businesses, according to the Small Business Administration (SBA). That's a 97 percent growth since 1977.

Yet less than 1 percent of the lucrative $140 trillion worth of federal contracts handed out each year go to female-owned businesses, defined by the SBA companies that are at least 51 percent owned, operated, and controlled by one or more women.

Government contracts are very often used by small businesses as ways to grow, says Peggy Leonard, a computer-training entrepreneur and member of the National Association of Women Business Owners. Because women generally don't have sufficient access to the government channel, they have had to grow their companies primarily through internal financing.

Although women like financier Virginia Kamsky and travel manager Ina Lee Seldon have prospered in Manhattan's eclectic and international arena, others in male-dominated industries have closed their doors, or come close to it, as the result of persistent resistance to their presence.

It took Christine Bierman seven years to get a commercial loan for her eight-year-old St. Louis safety-product company, Colt Safety Inc.

``Some of [the lenders] were so blatant about it, saying `if you bring your husband back, we'll talk,''' she says. As a result, she recalls, her business was ``operating on a shoestring'' until just last year.

It is hardly surprising, then, that companies run by women are not achieving the same profitability as those run by men, even though women are starting new businesses 1 times as frequently as men, and are contributing more than $100 billion to the US economy, reports the House Small Business Committee. The committee spent a year investigating the issue.

Improvement has been slow despite efforts on behalf of both past administrations and the SBA. In 1979, the SBA received an executive order to negotiate with each federal agency setting specific goals toward improving the number of prime contracts awarded to women.

If women business owners are ``the yeast of American economic growth,'' as National Association of Women Business Owners president Gillian Rudd sees it, the yeast has been sitting ``on a cold slab of community indifference for years.''

Making ownership a 50-50 deal

This month, chairman John LaFalce (D) of New York introduced to his House Committee on Small Business a bill that attempts to heat up that slab and make the business environment more hospitable for female entrepreneurs, specifically in areas of government procurement and access to commercial credit and statistical data.

``We're dealing with the residual effect of past societal discrimination coupled with the present subtle discrimination today,'' which has hampered women's entry into business, Representative LaFalce said at a press conference announcing the introduction of the Women's Business Ownership Act, or HR50-50, as it is called.

The measure would, among other things, require that all federal agencies set goals to increase federal procurement from firms owned by women. When handing out its major contracts, the government would also have to ask that successful bidders spell out how they are going to actively pursue minorities and women subcontractors.

The bill ``is not saying you have to hire a certain number of women or minority-owned businesses,'' says Beatrice Fitzpatrick, president and founder of the American Women's Economic Development Corporation, a nonprofit training program for start-ups in Manhattan. ``It is saying you should try to find the qualified firms run by women and minorities that are out there.

``Most contractors will only do business with people they know. The Department of Defense hands out 80 percent of federal contracts.''

Though a portion of the companies owned by women are very small - often run from the home and with no more than one or two other employees - there are many others able to provide the kinds of services both contractors and subcontractors are looking for, says a spokeswoman at the Small Business Administration.

``We didn't grow up thinking about being CEOs [chief executive officers] and stockbrokers,'' says Carey Stacey, president of DiaLogos International Corporation, a foreign-language center in Raleigh, N.C.

One networking tool that can make the proper connections was started by the SBA. PASS (Procurement Automated Source System), a bidders list used by all federal-government departments, now carries the names of 30,000 women-owned businesses and what products or services they offer.

Giving credit where credit is due

HR50-50 also addresses reports of discriminatory lending practices, something that is often subtle and very difficult to prove.

It would remove an exemption to the Equal Credit Opportunity Act that says the law does not extend to the business arena, but only protects women as consumers. Specifically, lenders would not be able to ask irrelevant questions about a woman's marital status, and if her loan request were denied, would have to provide a written explanation of the reason.

Traditionally, ``banks have often refused to lend money to single women to buy a home, no matter what kind of earnings they had, because the bank didn't expect them to continue those earnings,'' says Bickley Townsend, director of research and education at American Demographics, a magazine published in Ithaca, N.Y. It is true, she acknowledges, that until the 1970s, large numbers of women left the work force to raise families.

But today, ``women's labor-force participation is almost identical to that of men,'' Ms. Townsend says.

Still, women continue to experience discrimination when applying for credit, as was illustrated in testimony by dozens of witnesses at hearings the House Committee on Small Business held before drafting HR50-50.

The testimony indicated that little has changed since several studies were done in the middle 1970s showing that women are generally expected to meet a higher standard of personal worth than men when applying for business credit, and must provide greater security for smaller loans.

Going back to basics

Women in business for themselves, even those that have not faced prejudice, say that businesswomen continue to battle negative perceptions.

``In terms of a wider business view,'' says company owner Evelyn Goldstein, ``industries that are dominated by women don't have the highest esteem.''

In many cases, a lack of management and technical training combined with failure to secure adequate commercial loans frustrates women before they even get started, and steers them toward the traditional ``female industries,'' like health care, education, and services.

In fact, the most recent figures from the Internal Revenue Service indicate that women own half of all retail establishments and three-quarters of the businesses in the ever-expanding service sector.

Though ventures in nontraditional areas like agriculture, mining, and construction are growing quite rapidly, according to the SBA, growth in those areas is still small compared to service-related businesses.

Mr. LaFalce, in drafting his legislation, included a federal matching-fund program, one that he said would help finance the scattering of public- and private-sector training initiatives already out there, and encourage additional efforts.

Only five states had programs that applied to women business owners, and even those were not very relevant because of their requirements, according to a survey by the Department of Commerce's Economic Development Administration of state and city programs for women business owners.

The bill also includes a program of federal guaranteed business loans in the amounts of $50,000 or less, which would be for the service industry. Companies in this sector have traditionally been looked at less favorably by banks, since they lack the usual collateral.

Another provision would seek to improve specific government research on women and business. Even within the Small Business Administration and the congressional small-business committees, there is relatively little current or complete information on this subject.

You've read  of  free articles. Subscribe to continue.
QR Code to A fairer shake for companies owned by women. House bill takes aim at credit and contract discrimination
Read this article in
QR Code to Subscription page
Start your subscription today