ARCHIVED—Financing Profile: Women Entrepreneurs (November 2004)

November 2004

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Report Summary:
This profile describes the financing activities of small and medium-sized enterprises (SMEs) majority-owned by women in Canada. General business characteristics and financial growth performances are compared with SMEs majority-owned by men to highlight past and current gender differences.

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Christine Carrington, Industry Canada

Women entrepreneurs have been the topic of many research studies throughout the last decade. These studies have predominantly focused on women entrepreneurs' access to capital, often suggesting that women lack experience and networks, that women have poor credit ratings, or that Canada's financial institutions have rigid lending policies or even inherent gender biases.

Using the most comprehensive database on small business financing available through the SME Financing Data Initiative, this article examines the unique characteristics of women entrepreneurs and investigates whether these qualities influence the financing of women-owned businesses.

Strength in Numbers

Women are taking on the risks and rewards of entrepreneurship in ever-increasing numbers. Over the past two decades, Canada witnessed an increase in women's entrepreneurship of over 200 percent.^{Footnote 1} Since 1997, on average, women entered the small and medium-sized enterprise (SME) marketplace at twice the rate per year as men. Figure 1 shows the percentage of businesses operating in 2002 by the year of their establishment (for example, 8.5 percent of majority female-owned businesses operating in 2002 were established in 1997).

Women entrepreneurs outpaced men in new business start-ups, although this rate has converged since 2000. This means that women are operating newer businesses, with 39 percent of majority women-owned small or medium-sized enterprises having entered the market within the past five years.

By 2001, nearly half of all SMEs in Canada had at least one female owner (see Figure 2).^{Footnote 2} Women held majority ownership (51 to 100 percent equity in the firm) in 18 percent of SMEs, up from a 15-percent share the previous year. It is these women entrepreneurs in a majority ownership position that this article will focus on in order that comparisons can be made with majority male-owned businesses.

Economic Impact

Women's presence within the business landscape has had a noticeable impact on the Canadian economy. Almost 570 000 people were employed by majority women-owned businesses in 2001, and an additional 404 000 people were hired on contract.^{Footnote 3} Majority women-owned SMEs brought in combined annual revenues of $72 billion in 2000, representing approximately 8 percent of all revenues from Canada's SMEs.

The effect of this contribution has been felt across Canada, especially in Quebec, where majority women-owned SMEs accounted for 21 percent of the province's SMEs in 2001. The proportion drops to a 9-percent low in Manitoba and Saskatchewan. Throughout the Prairies, however, women's relative absence in majority ownership of firms is more than offset by the relatively higher proportion of male/female partnerships within the agricultural sector. In remaining regions of the country, women's majority ownership of firms hovers around 18 percent on average.

^{Footnote 1} Statistics Canada 2001 Census. Between 1981 and 2001, the number of women entrepreneurs grew by 208 percent compared with a 38-percent increase for men.

^{Footnote 2} Based on the definition of an SME used in Statistics Canada's Survey on Financing of Small and Medium Enterprises, which includes businesses with fewer than 500 employees and less than $50 million in annual revenues and excludes nonprofit and government organizations, schools, hospitals, subsidiaries, co-operatives, and financing and leasing companies, there were more than 715 500 SMEs in Canada with at least one female owner in 2001.

^{Footnote 3} Statistics Canada's Survey on Financing of Small and Medium Enterprises defines contract workers as those who are paid on a contractual basis rather than as a paid employee.