Skip to main content
HR 5050

Champions for women entrepreneurs: ‘Transformational’ legislation smoothed path for future business owners

Vol. 27 Issue 10

Post Categories: Law

Nearly 10 million American women own businesses.

According to the National Association of Women Business Owners, these entrepreneurs pay more than $264 billion in wages to more than 8 million employees, and their companies contribute more than $1.4 trillion in sales to the  U.S. economy.

Such staggering numbers would have been hard for some to imagine a generation ago, when women often couldn’t get a  business loan without a male co-signer.

“We’ve built an ecosystem for women entrepreneurs in the United States,” said Virginia Littlejohn, co-founder and president for Arlington, Va.-based Quantum Leaps Inc., which provides strategy, research and advocacy to accelerate the development of women-owned businesses. “We have incredible champions for women’s entrepreneurship, and we’ve been role models for other countries. We have so much potential, if we work together, to make an extraordinary impact on the U.S. and global economies.”

Littlejohn was one of the architects of the legislation that changed the landscape for women in business. The Women’s Business Ownership Act, or HR 5050, marks its 30th anniversary this month. President Ronald Reagan signed the landmark bill on Oct. 25, 1988.

“It was the big bang for women entrepreneurs,” Littlejohn said. “It  was transformational.”

Congressional hearings

NAWBO leaders knew from previous experience that presidential election years were an opportune time to orchestrate “our biggest, boldest initiatives,” Littlejohn said. At a reception for the House Small Business Committee in 1988, NAWBO leaders asked chair John LaFalce, D-N.Y., if he would be willing to hold substantive hearings regarding the challenges facing women entrepreneurs. LaFalce said he would but acknowledged that the Committee lacked deep staffing and expertise on the issue.

“NAWBO was ready to fill the gap,” Littlejohn said. “We worked flat out on this. About 10 of us put their own businesses on hold while we orchestrated the hearings.”

At a March “strategic slumber party” at a cabin in Virginia, five NAWBO leaders huddled to plot strategy, identify issues and start to think of witnesses.

Founding NAWBO president Susan Hager and then-NAWBO president Gillian Rudd were public relations professionals, and two days of NAWBO hearings in April generated extensive media coverage.

NAWBO’s witness list included Emmy Award-winning actress, singer and writer Polly Bergen — who also happened to be a business owner — and her appearance on the first day of the hearings ensured full attendance of the committee and the attention of the press.

Committee members were dumbfounded by the testimony of Lillian Lincoln Lambert, a Harvard Business School graduate who was able to secure a business loan only after her 17-year-old son was added as a co-signer.

“It was amazing testimony,” Littlejohn said. “That just astounds people these days, but many states had that requirement then.”

With the support of LaFalce and his chief of staff Don Terry, Hope Eastman, NAWBO’s vice president of public policy, drafted the legislation. The bill was introduced by LaFalce on July 14 and was passed by the House and Senate in early October. From its introduction in July to Reagan’s signing in late October, it took just 103 days for the bill to become law — lightning speed by Washington standards.

“One of the remarkable things about it is that we managed to get this accomplished in a few months,” Littlejohn said.

In addition to eliminating the need in many states for male co-signers on business loans, HR 5050 took other important steps to help women:

  •  It established women’s business centers, and today there are more than 100 in 48 states and Puerto Rico. The centers, which operate under the umbrella of the Small Business Administration, have helped more than 2 million women start or expand a business.
  •  It required the Census Bureau to include C-corporations — not just self-employed women — in data related to women-owned firms.  Doing so created a more accurate picture of what women-owned businesses contribute to the economy and the workforce.
  •  It created the National Women’s  Business Council, a nonpartisan, independent adviser to the president, Congress and the U.S. Small Business Administration on economic issues of importance to women-owned businesses.

Women’s business centers

Eleven years after HR 5050 became law, Kansas City still didn’t have a women‘s business center. In fact, there were none in Kansas, and the only one in Missouri was in St. Louis.

“There was a real gap of support for women entrepreneurs in Kansas City,” said Sandy Bartow, who was teaching business classes through Wayne State University and owned a Kansas City company that offered business consulting and strategic planning at the time.

Launching at the Enterprise Center of Johnson County (ECJC), with matching funds from the Ewing Marion Kauffman Foundation and the SBA, Joe Kessinger, ECJC president, and Bartow co-founded the Kansas Women’s Business Center in 2000.  Bartow served as its executive director until 2004. She then started another women’s business center in Jacksonville, Fla.

“Research has proven that women’s business centers are accomplishing their mission of supporting women in business and helping their companies grow,” said Bartow, who resumed her consulting business in Kansas City last year after retiring as president of the Jacksonville Chamber Foundation Inc. “Having a women’s business center in Kansas City for 18 years has moved the dial.”

Bartow said women‘s business centers have been effective in identifying what women need to be successful and developing gender-specific learning and mentoring programs. She surveyed businesses each year while working in Kansas City and Jacksonville and found companies that participated in women‘s business center programs had “markedly different increases in the number of jobs created and gross revenues” than women-owned business that did not participate.

Similarly, NAWBO said in its white paper on HR 5050 that 80 percent of business owners who receive education and assistance are still in business after five years, compared with 50 percent of businesses who don’t receive such services.

“We provided much-needed training and mentoring programs to support companies’ growth,” Bartow said. “Women had access to entrepreneurial education that didn’t exist prior to the women’s business center.”

Littlejohn said the creation of the women’s business centers in the 1980s was important because, at the time, small business development councils and the Service Corps of Retired Executives (SCORE) were often run by men who “thought women shouldn’t be in business. Our jobs were to be homemakers and mothers.” There also was a misperception, she said, that women-owned businesses were mostly “women making candles or macramé at their kitchen tables, and earning only $10,000 a year.”

Women’s business centers also provide access to capital, which is one area where women entrepreneurs still face challenges.

“It’s important to look at how things are, dream of how things could be and work to close the gap,” Bartow said. “The Kansas Women’s Business Center did that and continues to.”

Inequality persists

According to the U.S. Department of Commerce, the number of women-owned companies grew 44 percent from 1997  to 2007, twice as fast as men-owned businesses. During the same time,  women-owned firms added nearly  500,000 jobs to the workforce, while other privately-held companies lost jobs.

Today, Littlejohn said, nearly 40 percent of U.S. business are women-owned, and they are growing four times faster than men-owned business. Nearly 4 million of the roughly 10 million women entrepreneurs are minorities.

Despite their rapid growth, women in business still face unequal footing. For example, 80 percent of Fortune 500 board seats are occupied by men. That inequity doesn’t help the way women entrepreneurs are perceived.

“Unconscious bias still exists,” Littlejohn said. “People still don’t understand.”

According to NAWBO, women receive just 4 percent of funds allocated via commercial loans and only 2 percent of venture capital.

Jen Earle, NAWBO president and CEO, said the organization offers programming to help women with skills including confidence and public speaking.

“Women business owners sometimes aren’t as prepared as they could be,” she said. “They get turned down (for loans)  and they don’t go back. It goes back to confidence. We offer a community of support so women business owners don‘t feel like they’re going through it alone. We give them the confidence to go back if it doesn’t go right the first time.”

Earle also said NAWBO is working with banks to identify institutions that are supportive of women-owned businesses.

Littlejohn said one way to address unequal access to capital would be for more women to become angel investors. That, she said, requires education and training related to how to be an effective angel investor.

Progress is being made to support women entrepreneurs. The SBA increased its 7(a) lending to women-owned business by almost $300 million in 2016, and it increased its 504 lending by more than  $275 million.

Room for improvement

Public procurement is another place NAWBO would like to see women make headway. The topic originally was to be addressed by HR 5050, but Littlejohn said the issue was a dealbreaker for too many lawmakers at the time.

“It was controversial, and we knew it would cost us the bill, so we dropped it,” she said. “We thought we would be able to do that by regulation or legislation later, through the National Women’s Business Council, but it actually took many years.”

The federal government, which represents a more than $400 billion market, set a goal in 1994 for 5 percent of federal contracts to go to women-owned business, but no programs were established to ensure that goal was met. Congress passed the Women’s Equity in Contracting Act in 2000, but programs were not established to support it until 2010. To date, the federal government has met the 5 percent goal only once, in 2015.

“Much more needs to happen with public procurement,” Littlejohn said. “I’d like to see it closer to 10 percent as we continue to build the capacity and expertise of women-owned businesses.”

Some small, women-owned businesses are hesitant to take on federal contracts because of capacity issues, Earle said.

Laying the foundation

Earle owned a music company before becoming NAWBO’s chief executive three and a half years ago. She said she never felt hindered by being a woman in business and expressed gratitude to those who came before her.

“I tear up when I speak to women like Virginia Littlejohn,” she said. “When I was starting out, I didn’t really know what they went through so that I could live the life I imagined. There are still struggles, but they built a landscape so that we could have opportunities now. I’m proud of them and work they have done on behalf of  all women.”