To mark Women’s Small Business Month, Senate Finance Committee Ranking Member Ron Wyden, D-Ore., Wednesday introduced legislation to expand women entrepreneurs’ access to capital.
“Women business owners, particularly women of color, are underestimated, underrepresented and undercapitalized,” Senator Wyden said.
“Existing tax incentives do not do nearly enough to help women-owned small businesses. Our bill would diminish these gaps and help women-owned businesses hire and grow.”
Despite significant growth in the number of women-owned businesses, their share of business revenues has not changed in 20 years and remains stuck at 4 percent. Persistent barriers to accessing capital drive this gap. Male entrepreneurs, on average, start their businesses with nearly twice as much capital and are more likely to obtain a bank loan for their business in the first three years.
The gap is even more significant when considering only third-party capital. In 2018, only 2.3 percent of venture capital funding went to companies founded solely by women. Latinx and Black women have raised only 0.32 percent and 0.0006 percent of venture capital funding over the past decade.
While existing tax incentives benefit industries where women do not have a high presence, the benefit of certain tax incentives goes toward those with annual incomes far above that of most female entrepreneurs. Data show that less than 12 percent of women-owned firms have annual receipts in excess of $100,000.
To unlock the growth potential of these small businesses, the Providing Real Opportunities for Growth to Rising Entrepreneurs for Sustained Success (PROGRESS) Act would create two new tax incentives, a first employee and investor credit:
“As an entrepreneur, making sure I have enough working capital to survive is my number one priority," says Skyler Pearson, CEO of Nexgarden, Portland, Ore. based indoor farming company. "I’m in that phase where every decision is ‘make or break’, so it’s been daunting to take on new costs like hiring my first employee. But, having extra brain power from a new team member is often what takes a start-up from risky to investable. This bill will help early entrepreneurs make that first-hire leap”
“Barriers to capital access are contributing to the women’s wealth gap, especially for women of color," said Heather McCulloch, Founder & Executive Director of Closing the Women's Wealth Gap Initiative. "We applaud Senator Wyden's efforts to advance policy solutions that help women to establish and grow their businesses.”
A one-page summary of the bill is available here.