Austin Microfinancing Group Focuses on Female Entrepreneurs
A strong labor market and increasing wages have driven consumer spending and consumer confidence up. Entrepreneurs may view current economic conditions as a smart time to start a business. But, when it comes to financing that business, women often have a tougher time reaching their funding goals.
Just 25 percent of female business owners seek financing, compared to one third of male business owners. “It is common knowledge that only two-to-three percent of all venture capital financing goes to women,” said Adrienne Garland, a women’s leadership expert.
A lot of women use credit cards, personal savings and all too frequently, retirement accounts, according to BC Clark, director of business development at the Nebraska Enterprise Fund. They have trouble accessing credit and because of that, they face capital constraints. It is harder for them to receive loans, so they have to exercise other options, like microfinancing.
Microfinancing encompasses microloans, micro-savings and microinsurance. Institutions provide small loans and resources to entrepreneurs to help launch new businesses and help them become operational. The lending gives borrowers, “a fair chance to unleash their energy and creativity,” said Dr. Muhammad Yunus. He is believed to be the originator of the microfinancing movement which started in 1976. These microloans impact local economies and allow developing nations to dramatically improve living conditions.
Today, microlending from companies like Austin-based JUST and Accion International provide the same opportunities to U.S. entrepreneurs. While JUST is starting small with $2.6 million loaned across Texas, the U.S. Accion network has loaned $180 million to nearly 20,000 borrowers in thirty-five states.
JUST Trust the Process
“What we believe, is repayment of the loan is a start,” said Steve Wanta. Steve is the co-founder and CEO of JUST community, the Austin, Texas-based nonprofit that provides investment to low-income female entrepreneurs. He continues, “If we can help our clients build stronger businesses and build better money habits, we—at a minimum—will be paid back.”
JUST is focused on equipping their entrepreneurs not just with not only money, but the training to help create and maintain a successful business. As a result, the hope is for an increased need for jobs and a positive impact on local economies.
JUST is much different from the typical financial institution because they base lending on trust. If reading that raises an eyebrow, you are likely not alone.
Their business model is as follows:
- JUST raises loan money from foundations and philanthropic donations, as well as traditional banks under the Community Reinvestment Act.
- Clients are helped in three ways: capital, community and coaching.
- After completing an 8-week leadership and facilitation training program, JUST creates JETAs—JUST Entrepreneur Trust Agents.
- JETAs convene their own community loan-management circles.
- JUST underwrites based on trust. If a JETA recommends an entrepreneur and they complete the process, they will be accepted.
- JUST repays investors and lenders.
A recommendation from a JETA is all that is needed for an entrepreneur to be accepted. Regardless of their credit history, there is an initial loan for $750 to be repaid over 13 weeks (including interest). So far, JUST has a 99.3 percent repayment rate from its borrowers.
“By no means is the $750 initial loan enough money for anyone to build the business of their dreams. It’s an instrument of trust. If they are incapable of making timely payments every week for the next 13 weeks, we will not give them a loan increase,” Wanta said. “But if they fulfill all those commitments and do what they said they were going to do, then we’ll increase their loan amount up to $5,000.”
JUST takes their loans a step further—by focusing primarily on minority entrepreneurs.
“Women are the most excluded from access to capital, access to opportunity. Having women fulfill roles of leadership in all levels of society is really important,” explains Wanta.
Queens on the Board
According to the 2018 State of Women-Owned Business Report, the number of women-owned businesses expanded by 58 percent from 2007 to 2018. Currently, there are a total of 12.3 million women-owned businesses in the U.S., and collectively, those businesses generate $1.8 trillion per year. There are 114 percent more women entrepreneurs than there were 20 years ago.
A study from McKinsey and Co., in partnership with the Women’s Forum for the Economy and Society, noted that companies with a higher percentage of women in top management have better financial performance. Another research study by a major international bank revealed that companies with a female CEO had a 25 percent annualized return over eight years, compared to 11 percent for the broader worldwide index of firms.
Clearly, the future of female entrepreneurship is on the rise and putting women at the helm positively impacts business performance. Companies like JUST are doing their part to ensure that women have a fair shot at owning and growing a business.