Health Care and Economy and Government and Small Business

Creating opportunities in tough times: Tightening economy requires 'patchworking' sources of income

August 11, 2008

Women aren't leaving the work force to stay home with their kids-they're being forced out in equal numbers with men.

That's the word from "Equality in Job Loss: Women are Increasingly Vulnerable to Layoffs During Recessions," a congressional report released July 21. Often women who face job losses decide to forego the job hunt and opt instead for selfemployment, the report said.

Might this job downturn trigger a boom in entrepreneurship for women?

Not if they don't already have the money they'd need to launch a business.

Two of the major sources of startup funds are SBA loans or tapping into home equity. SBA lending is down nationally an average of 18 percent and the

Indiana District office is reporting a drop of nearly 30 percent in the state. Couple this with evaporating home equity as a result of falling home values, and where is a woman to turn for advice on securing funds?

In an April survey conducted by the Federal Reserve, senior loan officers reported that nearly 55 percent of banks have tightened lending requirements for small businesses and 70 percent have tightened home equity lines of credit since the beginning of the year. Until last summer, many banks were freer in lending because they sold most of the loans they issued. With the mortgage crisis, however, banks are now finding themselves stuck with these loans and are looking carefully at their customers, particularly startups.

Sharon O'Donaghue, executive director of Business

Ownership Initiative of Indiana, said that the majority

of people who come to her office seeking advice on securing business capital for both startups and existing businesses are women.

These days, O'Donaghue's clients are struggling with tougher lending standards. In the past a credit score in the range of 610 to 630 would mean an OK on a loan ranging from $1,000 to $25,000-now the required score is about 670, she said. And if you're looking for a loan of $26,000 to $50,000, credit scores of 710 to 750-above a good rating-are needed.

" You could not be in default on anything but maybe paid a bill a few days late and saw your credit score drop 20 or 30 points."

On top of that banks are demanding more collateral to secure loans. That's especially difficult for sole proprietors who in the past might have relied on credit cards and home equity for living expenses while their business took off.

Where to turn for help

In 2005, Cleveland-based KeyBank started Key4Women, a program that pledged to lend $1 billion to women business owners over a three-year period. By April 2007, the company had met its goal and increased the amount to $2 billion.

Lisa Hampton, senior business relationship manager with KeyBank, said the program also helps women achieve state certification as a Women's Business Enterprise, which opens up opportunities for government contracts. Last year there were 1,228 certified WBEs registered with the state.

KeyBank also provides referrals to organizations that can help entrepreneurs develop business plans.

"Business owners are entrepreneurs who can tell you verbally what they want to do but they might not be at the step of putting the numbers in place," Hampton said.

Billie Dragoo, CEO of Indianapolis-based medical staffing companies RepuCare and RepuStaff and past president of the Indianapolis chapter of the National Association of Women Business Owners has worked to promote affordable health care and access to capital for women-owned businesses.

O'Donaghue advises clients to look for ways to reduce operating costs. For example, work from home instead of leasing office space. If that's not an option, look for another small-business owner who might sublease office space.

Where can you hit some short home runs on revenue? O'Donoghue advises getting creative. For example, if you own a doggrooming business, visit veterinary offices and offer your services at a discount to their clients."

Those who are struggling, she says, are trying to maintain the standard of living they had when they had a double household income working for a Fortune 500 company.

"Today it's about patchworking income-threading together sources of income that meet one's lifestyle and household needs."
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