Why credit scores fail to tell the full story for entrepreneurs
By: Katrya Bolger
The WEOC National Loan Program provides funding to Canadian women entrepreneurs to start and grow successful businesses.
In 2019, Juliet Kego Ume-Onyido’ business was struggling to stay afloat. The Toronto-based financial advisor was facing health issues in the aftermath of her sister’s death due to cancer. The costs of covering her healthcare and being out of work for many months left Kego Ume-Onyido in a financially vulnerable place – and the COVID-19 pandemic only worsened her situation.
At the same time, Kego Ume-Onyido had her own entrepreneurial dreams. In 2010, she had started running financial literacy workshops for women of African descent around Toronto and wanted to grow the idea from an informal collective into a social enterprise. After a decade of work, surviving personal hardship and a global pandemic, the Whole Woman Network (WWN), officially became a licensed social enterprise in 2022. The network offered a space for women from diverse cultural backgrounds to learn from and support one another as they pursued their own businesses.
One of Kego Ume-Onyido’s biggest hurdles came in 2020, when the COVID-19 pandemic hit, and she needed more funding to improve the network’s operations and digital presence. But when she started approaching various banks and credit unions, she says she kept running into issues concerning her credit score – a number that is typically used as an indicator of financial character and a key factor in securing funding as an entrepreneur. During her health crisis, Kego Ume-Onyido says her credit score took a major hit due to some late payments. While the banks and credit unions acknowledged her solid business plan, she said that her score kept coming up as a problem. The record of those late payments could sit in her report for up to seven years, according to some collection agencies, and continue to affect her score long after she’d gotten back on track.
Heather Sadowy, loans manager at the Women’s Enterprise Organizations of Canada (WEOC), says credit scores can often make or break an entrepreneurs’ ability to access funding: “Personal credit scores are used by most financial institutions as a sort of pre-screening tool. If it’s below a certain number, the request may not even be considered.”
But in 2022, Kego Ume-Onydio learned about a new funding opportunity that would change her prospects – the WEOC National Loan Program. The federal funding program led by the Women’s Enterprise Organizations of Canada (WEOC) offers loans of up to $50,000 for women entrepreneurs to start or expand their businesses. Created with a holistic lens, the program seeks to create a low-barrier approach for women to access funding outside the traditional constraints, including no set requirement for a credit score.
Kego Ume-Onyido jumped at the opportunity to try another funding path – and she quickly noticed the application process with WEOC was different: “There was room in my loan application to ask if there’s anything in my credit score that’s been a barrier. [WEOC] asked me, for example, ‘Can you explain more why that exists?’ It was a space to actually share this happened because of this.”
According to loans manager Sadowy, the WEOC program was designed to take into account factors other than credit score when evaluating the likeliness of repayment. “We believe that a credit score alone does not tell the whole story,” she says. “Often times, there are unique circumstances that have affected an individual’s credit history, and those situations are not necessarily a reflection of an individual’s character.”
She adds that many young or newcomer women may not have a credit history at all – and that credit reports can contain errors. She further notes that the WEOC loans team has yet to see a correlation between low credit scores and missed payments among clients.
In 2022, Kego Ume-Onyido received funding from the WEOC National Loan Program and she cites the fact that she was able to share the reasons behind her credit score as key to securing that funding: “It was the first time someone was listening to my story, the story of our impact, and how life gets in the way.”
With funding from the loan, Kego Ume-Onyido says she was able to expand WWN’s online digital services so members can access on-demand training. This has allowed them to expand the reach of their membership outside of Ontario. They were also able to hire administrative and social media staff, while landing a distributorship contract to supply their women business owners’ products to different stores.
Kego Ume-Onyido says she wishes more funders would take the approach of WEOC and listen to clients to look beyond their credit scores: “There are things that happen in women’s lives that don’t get captured by the algorithm or credit score…I started out with a great credit score, but life happened.”
Looking for more?
- Visit Loan Fund Partner PARO Centre for Women’s Enterprise website
- Find out if you are eligible for WEOC National Loan Program funding
- Read the FAQs about the WEOC National Loan Program