The climb to business takes grit

The course of female entrepreneurship never did run smooth. Shakespeare's line, updated somewhat, is still true today, when women own 25 percent of the small businesses in the country but generate only about 10 percent of total business receipts.

True, the most blatant obstacles have been removed.

``In earlier days, women did have to overcome barriers'' to starting their own businesses, says John Hornaday, director of the center for entrepreneurial studies at Babson College, in Wellesley, Mass. But studies on the differences between male and female entrepreneurs suggest that ``the barriers are not there, or even perceived to be there, any longer.''

Women entrepreneurs will tell you a different story. They note that many obstacles are self-imposed - failing to apply for a bank loan, for example - but they contend that other barriers are created by outsiders or perceptions of society.

Talk to Joanna Filomena, who owns a $3 million-a-year restaurant in the Georgetown section of Washington, which turned a profit in its first year (1983) and is frequented by the likes of Dustin Hoffman, Goldie Hawn, Al Pacino, George Bush, and German Chancellor Helmut Kohl. Ask her if the struggle was, and is, worth it. She pauses for several seconds, then doesn't really answer. ``It's a tremendous physical grind. It's my whole life.''

Ms. Filomena was the textbook case of how to start a business. She had experience, having been in the restaurant business all her life. She had a marketing plan and specific financial goals. She was willing to ``put everything on the line, my home, my jewelry,'' which she believed would indicate her commitment to bankers.

But hers is the textbook case gone awry, at least in the initial stages.

``I went to every major bank in the city,'' she says, but could not get a loan. She suspects that bank lenders were leery of giving such a large ($550,000) loan to a woman, especially an unmarried, attractive woman who might ```find' someone, as if you're looking through the trash,'' and lose interest in her company.

The tide turned when the Small Business Administration guaranteed 90 percent of the loan. Nearly a year later, she reached receptive ears at First Commercial Bank in Virginia. ``When [bankers] feel they can't lose, they'll talk more seriously to women,'' she says of the Washington banks.

Female entrepreneurs say that getting credit is their biggest problem. A July survey of National Association of Women Business Owners (NAWBO) members found that 38 percent were turned down for loans, and two-thirds of those women claimed that sexual discrimination played a role. Of the women who were offered loans, 29 percent claimed they were on less favorable terms than for men.

Often, banks ask husbands or other relatives to co-sign the note, make two-party checks (to the entrepreneur and, say, the general contractor), or make relatively small ($10,000 to $20,000) loans. ``It's tough for someone to build a successful company with that amount of credit,'' notes Susan Chaires, general counsel of NAWBO.

The Equal Credit Opportunity Act prohibits discrimination in lending on the basis of race, color, religion, sex, and other considerations. A provision in the code weakens the law, however, when it comes to commercial (vs. personal) loans. A bank may ask personal questions like marital status, and after a short period, it does not have to explain why it turned down the loan or keep the applicant's credit records. Often the applicant will not know to ask for the reasons or the records until it's too late, and is thus likely to show up at the next bank with the same weaknesses in her presentation. NAWBO will be lobbying the new Congress to stiffen the act.

In part, women ask for trouble by the very nature of the businesses they start. Robert Hisrich, a professor at the University of Tulsa and co-author of the book ``The Woman Entrepreneur'' points out that some 90 percent of businesses started by women are in the service industry. ``It's easier to get financing in manufacturing and construction because there are hard assets'' to secure as collateral, he says. This also accounts for the relatively few women supported by venture capitalists, who tend to favor manufacturing and high-tech companies, he says.

And in part, the credit problem feeds upon itself. Women don't think they'll get loans, or favorable terms, so they don't apply. Catherine Maiorisi, who founded the consulting firm Computer Concepts 7 years ago, persuaded her brother to lend her money for the first payroll. Only after three years, when her company was in good financial shape and growing quickly, did she apply for a line of credit.

She thinks having a male lawyer who was a friend of a male banker and hiring a male accountant put the bank in her court. ``Would I have gotten a line of credit on my own?'' she asks. ``I don't think so. The old-boy network worked for me.''

A woman considering starting her own business can avoid many of the mistakes that have discouraged others. Here are some tips from entrepreneurs and business analysts.

Scout out the market. Mr. Hisrich at the University of Tulsa says that women, even more than men, get ``too involved with the product,'' which may lack uniqueness in the marketplace or has too small a market to become really profitable.

Decide what you are going to focus on and stick to it, ``even if it means being hungry for a couple of years, says Ms. Maiorisi. It's tempting to ``go where the opportunities are'' and stray from your area of expertise, which can eventually cause problems.

Avail yourself of others' expertise - from the Small Business Administration, where retired business people give advice, or from other entrepreneurs. Joanna Filomena, whose construction of her Georgetown restaurant became a nightmarish legal battle with contractors, now gives seminars on handling construction problems. Aside from NAWBO, there are scores of women's business organizations that offer advice.

When you try to get money from a bank, venture capitalist, investor, or some other outside source, be prepared with a business plan with concrete financial objectives. You might hire a consultant, but you should be involved in the process. ``You have to have an idea of where you want to go from beginning to end so there are no surprises in the middle,'' Filomena says.

Have a financial track record. Hisrich recommends taking out a personal loan before you try to get a commercial loan, whether you need one or not, just to establish credit. If you can show prior experience in financial management, even if it is for a volunteer organization, that will strengthen your application.

Check out the bank's lending record before applying, and try to get a hint at what it's looking for. You can call and ask what kind of business loans it's giving (mainly loans to manufacturing companies, for example, and not to service industries).

If you are turned down, ask the bank (in writing) for the reasons within 30 days and for the credit files within 90 days. These may provide clues to improve your next application - but they can be thrown away if you wait too long to ask for them.

Negotiate on the credit terms. ``I think women have a tendency to jump at an offer before the banker has finished his sentence'' - and accept too many restrictions, like a two-party check, says Filomena. Displaying a male-like confidence, if not brinkmanship, can dissolve some of those stipulations.