'I needed to have my husband co-sign the loan': accountant says women entrepreneurs face funding obstacles

Banks, government agencies and capital investors generally agree that women approach financing their business ventures differently from men.

The greatest difference is confidence with debt. The Women Entrepreneurship Knowledge Hub released a report in 2020 that says 83 per cent of women-owned businesses use personal sources of funding, and the are less likely than men to obtain other forms of financing, such as loans or investors.

The size and scale of the businesses women operate are also different. Most women-owned businesses employ 20 people or fewer, while men almost exclusively own and operate businesses with 500 or more employees, the State of Women Entrepreneurship in Canada report says.

Keeping these differences in mind will be important post-pandemic, as Manitoba looks to small and medium-sized businesses — which account for 90.5 per cent of all private-sector jobs — to scale back up and help rebuild the economy.

For the fourth part of "The Icons and the Emerging" series, which explores female entrepreneurship in Manitoba amid the pandemic, chartered accountant Priti Mehta-Shah and aspiring business owner Lourdes Still discuss the obstacles to funding a business idea and the relationship women have with debt and credit.

Note: this conversation is a transcript that has been edited for clarity and length.

Lourdes Still: I started growing flowers for markets in 2018 on two small garden beds at my home in La Broquerie, Man. I grow flowers without synthetic fertilizers in garden beds where lawns previously existed. There are only around 120 planting days, or frost-free days, and it didn't sit well with me that my flowers were only good as fresh cut in bouquets.

I really wanted to keep running my business year-round and so I had to be creative in other ways to get my Masagana Flower Farm — which means abundant in Tagalog — to continue giving year-round.

This year, I planted flowers that are not only good as fresh cut, but also as dried flowers, and I started experimenting with plants and flowers that can be turned into botanical dyes, such as growing indigo from seeds on my farm for Manitoba fibre artists.

I'm pretty excited about this conversation because I get to ask you questions about things that other women might have difficulty talking about too.

Winnipeg is a very multicultural province, but I wonder if a woman's upbringing or culture affects their relationship to money — does it affect them trying to go to the bank, get a loan or approach other business groups to present their ideas?

Priti Mehta-Shah: If you'd asked me this question 10 years ago, my answer would be different than it is today. There used to be many differences in how men financed their businesses versus how women do. The gap is narrowing though.

I find that women tend to use their own money to finance — they borrow small amounts from friends and family — whereas men will go to banks, secure venture capital or private equity in large amounts.

Some women are also willing to take that risk and may choose private equity, but it means giving up some ownership of the business, and many don't feel comfortable with that. Women want to keep control of their businesses. If you are going to use private equity or venture capital, you are likely going to have to give up some equity.

The other difference is that women tend to start small or micro-businesses, and so it is more difficult to get private equity or venture capital to invest in these types of businesses. 

Larger businesses with growth potential may be able to access private equity or venture capital because of their growth potential, cash flows and previous equity positions. Men tend to have greater representation as owners in these types of enterprises. 

Also, women are less inclined to take on large amounts of debt and they take the responsibility of owing money seriously and personally — meaning that they want to know they can make payments regularly — and only once debt is paid off will they begin to explore other stages of growth and financing.

Credit denied

Lourdes Still: Since you've worked with both men and women entrepreneurs, do you find that there's a difference between the two on how they handle their finances?

Priti Mehta-Shah: You know, I started my career about 25 or 30 years ago, but I wasn't an entrepreneur. 

I was a CPA [chartered professional accountant] at a large accounting firm here in Winnipeg and my first experience as an entrepreneur was when I became a partner. I'd been working with a bank for many years and bringing clients to them to help secure financing for my clients' business ventures.

When it came time to my own partnership interests, I thought I would go to them as well.

One of the first things I was told was that I needed to have my husband co-sign the loan for my business partnership.

I just about fell off my chair.

Here I was, having brought millions of dollars in financing business to this bank, and I thought I had a relationship with this bank. They knew what I was capable of and they knew my income, as well as what my potential was. I was not going to accept financing with them with a co-signer.

I left there and went to another bank who understood my income and potential and didn't ask for a co-signer.

But there was a lesson that I learned and I think women should keep this in mind when they are starting their careers.

You see, I had no credit history, so the first bank required a co-signer. I didn't have any credit cards in my name, even though I was a professional. I just had no need for a credit card in my name. My husband was the primary card holder and I was the secondary on his card, which meant I did not have any credit history of my own.

It didn't even dawn on me that I hadn't established my own credit history.

Writing a business plan

Lourdes Still: I am writing my business plan right now. What are specific things that I need to focus on when presenting it to the bank?

Priti Mehta-Shah: It sounds like you've started to identify some of the key elements in your business plan.

You have identified your product, your market, you are also looking at what other opportunities there are for the space during the off-season. 

Banks will want to also understand your market, your marketing plan. You will have to show them that there is a market for your product and how you are going to bring customers in.

What are the projected sales over the next three years? Do you have enough space for these projections, and what other resources do you need to achieve these projections?  What are the corresponding costs associated with these sales, such as marketing, employees, cost of sales, etc.?

They will want to see cash flows for these projected sales and they will want to understand if you can make your debt payments, how long it will take for you to pay off their debt or for them to earn a return on their money.

Lourdes Still: I feel like it comes down to having to face my fears in facing how I manage and understand the financial aspects of my business. That is why when this opportunity came up to speak with you, I really thought it could help build my confidence and move forward with the vision I have for my business.

Priti Mehta-Shah: Well, you've already started the business. You've faced a lot of your fears already!

Basically now it's formulating your business plan and putting it on paper, and then presenting it to different financiers to explore your options.

If I look at the long-term bigger picture, I want to help women see that it is not taboo to increase value in their business, build their own wealth and become financially independent.

Advice for women starting out

Lourdes Still: The story that's coming to my mind these past few days as I was getting ready for this conversation was what my grandfather or Lolo said to me before I moved to Canada in 2009. 

You see, I'm a very enthusiastic person and when I have an idea, I just really go — there will be plenty of ideas. 

But what he said really grounded for me. He said don't count your chickens before they hatch. So it's okay to have those ideas, those big plans, but sometimes you have to just take a step back and have a reality check.

He passed away the same year I moved to Canada, and I will carry that lesson with me always, keeping my gaze on the present while planning for the future.

So I want to ask you, what are some of the lessons that you have learned during your time as a business owner and also someone who finds finances for startup businesses.

Priti Mehta-Shah: As a woman business owner, or any business owner, it's so important to have an advisory committee around you. These are the people who have been in your industry, or who have run businesses before.

Like your story, my grandfather used to say that smart people learn from their mistakes, but intelligent people learn from other people's mistakes.

You cannot run a business by yourself. 

So whether it be mentors, advisors or employees, you need to surround yourself with smart people who you can learn from and who can help you run your business. Have the confidence to admit when you are wrong and learn from others.

Priti Mehta-Shah is the president of Mehta Capital in Winnipeg and helps her clients secure venture capital and startup capital, buy and sell businesses and prepare business valuations. She has been chair of the Winnipeg Chamber of Commerce, chair of the Women's Enterprise Centre of Manitoba and held the role of senior vice-president of BDO Canada.

Lourdes Still is the founder and owner of Masagana Flower Farm in La Broquerie, Man., growing flowers sustainably where lawns previously existed. After moving to Canada in 2009, she became a flower buyer for a large wholesale company and that grew into a seasonal business in gardening and using botanical dyes to make naturally dyed goods.