Being Female Affects Business Loans from Family and Friends

Building on research that shows that women and men entrepreneurs are rewarded differently by banks for the display of personal commitment to their business and business success, this study investigates if women are also held to a higher standard by family and close friends when seeking financing. Our findings reveal that although women, on average, receive larger loans from family and close friends than their male counterparts, they must demonstrate a high personal investment in their business and number of employees in order to obtain these larger loans. Thus, while family and close friends are willing to financially support women entrepreneurs, the women must prove their business' quality and commitment to their business to obtain larger loan amounts. Conversely, men entrepreneurs do not appear to be held to such a standard. As such, even family and close friends show some gender bias against women entrepreneurs when granting loans.