Today there are nearly 12 million women-owned small businesses in the United States that generate almost $1.7 trillion in revenues. But 30 years ago, it wasn’t the same story — these business owners’ financial futures could have been out of their hands due to sexist lending practices, incomplete government data and limited advocacy on their behalf.
In 1988, women owned just 4.1 million businesses in the U.S — which may have been partially because acquiring financing was so difficult. Up until 1988, lenders could require women business owners seeking financing to have a male cosigner. This shocking and unfair practice made it difficult for women business owners to get the funding they needed to grow — limiting their ability to do everything from open a new location to make payroll or even just refinance other debt.
That all changed with the passage of H.R. 5050, also known as the Women’s Business Ownership Act of 1988. This legislation is considered a landmark for women in business, changing the landscape of business financing for women in the United States forever.
H.R. 5050 went on to shape the future of women and business in three critical ways:
It banned lenders from requiring a male cosigner.
One of the many witnesses to the H.R. 5050 hearings was a woman who didn’t have a husband, father or brother available — so she had to ask her 17-year-old son to cosign a business loan for her, which sadly was not an unusual story. By making this practice illegal, the bill helped level the playing field for women in business.
It created the National Women’s Business Council.
This council was established as an independent and nonpartisan federal advisory council. Today, it advises on issues of impact and interest to women-owned businesses by providing data and research to the White House, Congress, the Small Business Administration and the public.
It required the U.S. census to track women-owned C-corporations when reporting data.
In the 1980s, the Small Business Administration released a report that mistakenly claimed almost all women-owned businesses were home-based and had sales of under $10,000 per year — largely because data to the contrary wasn’t available. Knowing this to be a factually misleading report, the National Association of Women Business Owners’ then-president, Gillian Rudd, held a press conference on the steps of the U.S. Capitol to publicly call out the misguided report, which kicked off the call for H.R. 5050. With the belief that knowledge is power, this bill mandated that the government collect more complete information on the state of women-owned businesses.
Together, these pillars helped pave the road for women-owned businesses — and over the past 15 years alone, women-owned enterprises have grown 1.5 times faster than other small enterprises. Access to capital is crucial for any business, and this legislation helped evolve long-outdated practices and beliefs that unfairly favored men. In recent years, online lending platforms like Funding Circle are helping to create opportunities for all. There still may be miles to go in continuing to equalize credit opportunity for everyone, but this significant step in women’s business history is surely worthy of celebration.