During the decade after the 2008 financial crisis, appetite for new banks dried up in the Chicago area.
Now, a group of local women from the banking and professional services industries is looking to start a new commercial bank in Chicago, with a focus on lending to women-owned businesses.
First Women’s Bank, which received conditional approval this month from the Federal Deposit Insurance Corp., would be the first financial institution startup in the Chicago area in more than 10 years. Organizers are still raising the necessary funds but aim to launch early next year.
The idea for the bank grew from a discussion among the three co-founders — Lisa Kornick, Melissa Widen and Amy Fahey — on how female entrepreneurs still trail their male counterparts in accessing loans even as more women start their own businesses.
“During my time as a restaurant owner, I needed to select a new bank because our existing bank could no longer meet our needs,” said Kornick, co-owner of DMK Restaurants, which operates Ada Street and DMK Burger Bar in Chicago.
“I was shocked to find there were no banks focused on women. As an entrepreneur, I immediately saw an opportunity,” said Kornick, 55.
Kornick will serve as the bank’s chief experience officer. Fahey, a former banking executive for about 29 years with JPMorgan Chase & Co., will be chair of the board of directors, and Widen, a former Chicago attorney, will be vice president and chief administrative officer.
Marianne Markowitz, who led the U.S. Small Business Administration as acting administrator under former President Barack Obama, will be president and chief executive.
“I know a lot about the gender lending gap from my time at the SBA. It’s real. It’s persistent. It’s up to banks to really solve it. This is really about supporting the women’s economy — the growth of which is led by women of color,” said Markowitz, 54.
Women-owned businesses make up about 42% of the 30 million small businesses in the U.S., according to a 2019 report by American Express.
Between 2014 and 2019, the number of women-owned businesses grew 21%, with women of color leading the growth. Women of color made up half of all women-owned businesses in 2019, the report found.
Those are the businesses First Women’s Bank is trying to target, like hair salons, child day care centers, bookkeeping firms and consultancy firms, Markowitz said. She said the bank will offer traditional lending products, with a focus on SBA-backed loans.
Markowitz, who led the SBA in the Midwest region and nationally for about eight years, said SBA lending is a profitable area for small business lending because of the government’s high guarantee rate, which also makes it a great tool for service-related industries.
But women don’t always benefit from such programs. During the SBA’s rollout of the federal Paycheck Protection Program, several minority- and women-owned businesses said they had trouble accessing loans because they lacked relationships with larger banks or had troubles filling out the application.
“There’s dissatisfaction out there, especially with the larger banks on how they dealt with that (PPP) program. That’s a benefit to our bank. Anytime there is a disruption, it’s a real benefit for us,” Markowitz said.
Even as more women start their own businesses, studies show men account for the lion’s share of borrowers. Women-owned businesses made up 28.3% of borrowers in 2018, according to a report by the Biz2Credit, an online credit resource for small businesses. The study included 30,000 companies nationwide in sectors like retail, health care, hospitality, construction, and professional services.
Experts say women are more likely to fund startups using credit cards, which could affect their credit scores and chances of applying for loans in the future.
Abigail Scanlan, associate director of access to capital for the Women’s Business Development Center in Chicago, said many female entrepreneurs lack the confidence to apply for a bank loan or are dissuaded by the amount of documentation required.
“They don’t know who they can turn to. They tend to be afraid to reach the finance topic,” Scanlan said.
When Teresa Ging left her job in finance to pursue her dream of opening cupcake shop Sugar Bliss Cake Boutique in the Loop 13 years ago, she didn’t want to tap into her retirement savings or sell her condominium to start her business.
She sought help from the Women’s Business Development Center to apply for loans at three different banks. One rejected her application, telling her she was too young and needed to provide a secondary income, she said.
Now 42, Ging was 28 at the time. “I had six years of finance. I had collateral and a good credit score,” Ging said.
It was only after she got in touch with the bank manager to discuss the reason for her rejection that the bank approved her for a loan, Ging said.
“Even though they gave me a good rate, I didn’t go with that bank. I ended up going with another bank because they treated me well,” she said.
Organizers of First Women’s Bank said a bank led by women will be better able to understand the needs of female entrepreneurs.
“They want a quick answer. They are looking for competitively priced options. They need connections to appropriate commercial capital in order to navigate away from an over-reliance on personal credit. First Women’s Bank is uniquely positioned to serve these needs,” Markowitz said.
Though the coronavirus pandemic slowed down fundraising, the bank’s organizers are pushing ahead with plans to launch and hope to open a flagship location in the city’s Goose Island neighborhood by early 2021. The organizers declined to say how far along the fundraising effort is, but they must raise $50 million by Sept. 30.
“We experienced a slowdown in March, April and May as the economy here really shut down. We were experiencing tremendous momentum before that, and now we are experiencing that same momentum as we refocused on capital raising in June,” Markowitz said.
In addition to deposit insurance from the FDIC, the organizers must also obtain a bank charter from the Illinois Department of Financial and Professional Regulation and plan to file an application this fall with the Federal Reserve to get approval for FWB Financial Inc. to operate as the holding company.
The bank is bringing various people from the banking and professional services industry on board. Maria Tabrizi joined earlier this year as chief risk officer. Tod Gordon, a former banking executive at Riverwoods-based Discover Financial Services, will be chief financial officer. And Colleen Ryan, who led corporate communications at Kraft Foods and the Archdiocese of Chicago, will be the chief marketing and communications officer.
The last bank to launch in the city was Gold Coast Bank in 2007, according to the American Bankers Association. Nationwide, new banks have dwindled. According to the association, more than 1,000 banks opened between 2000 and 2009, but that number dropped to 27 between 2010 and 2019.
Tim Keehan, vice president and senior counsel at the Center for Securities, Trust and Investments at the association, said the decline has to do with the difficulties organizers face raising money.
“These are local community leaders. They don’t have deep pockets. They have to go out and raise money, and they only have a certain amount of time to do it,” he said.
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It wasn’t hard scouting for a new home. The organizers of First Women’s Bank chose Chicago because of the amount of women-owned businesses in the city, said Widen, 54.
According to a 2019 report by Startup Genome, a San Francisco-based data research firm, women accounted for 25% of startups in Chicago last year, higher than the global average of 14.1%.
“The women’s economy is very robust in Chicago. We know that more than 400,000 women-owned businesses have been started here and are operating in Chicago. … So the pipeline for women-led businesses is strong and growing,” Widen said.