Financial advice for Canadian women entrepreneurs

Trust your instincts. Grow your networks. Be bold. Dream big. These were among the powerful messages shared at a recent virtual conference highlighting the financial challenges facing Canadian women entrepreneurs.

Hosted by the Women’s Enterprise Organizations of Canada (WEOC) and co-sponsored by Export Development Canada (EDC), the month-long event (Feb. 1-22) included expert discussions and presentations on key issues impacting women-led companies. It was also an opportunity to network with financial advisors, marketing specialists and women business leaders across Canada about the advantages of exporting.

“There are a lot of benefits for Canadian companies to sell their products and services internationally. In fact, research shows Canadian companies that export can increase profitability by 121%, productivity by 30%, and innovation by 25%,” said Catherine Beach, EDC’s national lead for Women in Trade and a moderator at the third annual WEOC X: Exchange, Expand, Explore National Conference.

But she admits exporting also comes with myriad challenges.

“Every business on the cusp of expanding internationally—or in the thick of it—needs access to capital. We also know that doing business internationally can be risky, and non-payment is one of the top risks businesses are concerned about when selling internationally.” 

For women entrepreneurs, who tend to be more risk averse than their male counterparts, even asking for financial support can be difficult, let alone pitching their business to venture capital investors.

“We’ve all heard the stats about the percentage of equity capital going to women and diverse founders. Women-owned businesses currently receive just 2.8% of venture capital (VC) funding available worldwide, and an estimated 4% of VC funding in Canada,” Beach noted of the investment inequality. 

“Women are also under-represented among equity investors, representing only 15.2% of Canadian VC partners and 16.7% of Canadian angel investors.” 

So, why are women business owners less likely to get a loan or equity to fund their company growth? What are the benefits to having credit insurance on your exports and how do you find the right broker for your business?

In a Feb. 17 panel discussion on financing international expansion and risk mitigation strategies for women entrepreneurs, Beach turned to three experts for answers.

Advice from the pros

Beach: Access to capital is the No. 1 challenge and barrier for women entrepreneurs. Research shows that women actually launch businesses with 50% less capital than men and often, they’re reluctant to get financial support from a bank. Why is that?

El Saddi: When a company is growing, working capital is key and should the working capital be weak, it’s going to slow the growth and probably stop it completely.

In general, women are conservative when it comes to loans. They don’t like to live with debt. Instead, they use their own personal savings or money borrowed from family or friends to fund their business before they come knocking on the bank’s door for help. Often, women come in too late for financial support. 

Because they’re not leveraging working capital, women entrepreneurs tend to keep their company small. But it takes money to make money. Once you provide them with the knowledge and explain the benefits to using credit for growth, they’ll take action.

Davy: Women entrepreneurs tend to be more risk averse and tend to be more cautious when it comes to extending credit. They know what they’re getting themselves into and they want to know all the details and analyze their options. 

Beach: Venture capital and equity investments are another option to help finance business growth. Can you explain how they work and the pros and cons?

Birikundavyi: They’re different than traditional loans: Investors take part ownership of your business and become a partner who’s there to support you. The amount of money that’s available on the venture capital side in the long run is significant and the support provided is usually highly relevant if you’re looking for exponential growth locally and internationally. That’s the big pro.

On the con side, a venture capitalist can be described as a “glorified Mom and Dad” with their own opinions and perspectives on how to operate your company. You’re no longer running your business as a sole entrepreneur. If you want to make significant changes, you need to get their alignment, which can make you feel like you’re asking permission.

Bottom line: You need to make sure your objectives align. Every investor comes in with the objective of coming out of your business in a few years. As VC funds, we’re all there to return a profit for our own investors. If you want to dominate the world, grow your business, but not offer any exit pathway for your investors, you’re not setting yourself up for success in this relationship.

Protection from non-payment

Beach: Why is it important to have credit insurance? 

Davy: The key benefit to credit insurance is it protects your accounts receivable from non-payment for your goods. But it can also increase financing from your bank—there’s comfort in knowing that you’re protected from default payments—and serves as a valuable management tool to help cap or reduce losses because if your credit insurer tells you, “This is a really big risk,” you should listen to avoid loss.

Beach: Any tips for finding the right insurance broker?

Davy: A broker is there to be an advisor for the client and come up with strategies and solutions for a variety of issues, including how to collect payments from defaulting customers. We also shop the product to get them the best coverage at the best price. When “shopping” for a broker, don’t be afraid to ask for references from other clients. Are they satisfied? Also, which insurers do they work with or do they specialize in payment collection?

Tips for exporting

Beach: What advice would you give a woman entrepreneur looking to grow her business internationally?

El Saddi: Networking is extremely important. It’s not necessarily what you know—but more importantly who you know. Knowing the right people will open doors for you and unlock barriers.

Davy: Surround yourself with good advisors and follow your instincts—they’re going to lead you in the right direction.

Birikundavyi: From a venture capital perspective: Be bold. Be ambitious. Don’t settle for $1 million in revenue when your company could make $100 million. Just because you haven’t seen it, doesn’t mean you can’t be it. Have those big dreams and go for it!

How EDC can help

• EDC Inclusive Trade Investment Program: We’ve committed $200 million in equity support for companies founded or led by diverse Canadians.
• EDC Investment Matching Program: We’ll work with your venture capital or private equity investor to increase your access to more working capital with expedited approval withing 10 business days.
• EDC Credit Insurance protects your account receivables from non-payment. If a customer doesn’t pay you, we’ll cover up to 90% of your insured losses.
• EDC Working Capital: Download our Top 5 banking tips for getting more working capital for your business.