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Section 4: Reducing sludge in online financing applications

Many women entrepreneurs in Canada opt to fund their business start-up and/or growth with personal savings or credit cards instead of applying for loans, grants, lines of credit, or venture capital. Why is self-funding the default option for so many?

The problem stems, in part, from application processes that are onerous or unpleasant because of the existence of ‘sludge’: unnecessary frictions that can slow progress and block access to necessary goods and services.

Examples of sludge include jargon-filled application forms, unclear qualification requirements, and repeated requests for the same basic data. Sludge wastes time and increases frustration. It perpetuates underfunding of women-owned businesses and harms the reputation of funding institutions.

Access to loans and grants should be made as easy as possible for entrepreneurs who want and need them, while still ensuring that appropriate standards remain in place for vetting applicants. This guide outlines a systematic process, driven by behavioural science, for detecting and correcting the presence of sludge in online financing applications.

Tackling Sludge Together

Sludge can be hard to detect. We are all vulnerable to the ‘curse of knowledge’ – that is, to the inability to put ourselves in the position of someone who does not have the same information, education, training and experiences that we do. Overcoming this vulnerability requires that careful attention be paid to the selection and training of people to serve on an organization’s Sludge Audit Committee.

Getting Started

Four areas to assess as you begin an audit:

1. Access and transparency

  • Can business owners easily find the right form?
  • Is it clear who qualifies for this product?
  • Is there a list of what is required (in terms of time and supporting documentation) to complete the application?

2. Navigation and design

  • Is there a logical and efficient flow to the application?
  • Is there effective use of imagery, colour, font size, and spacing?
  • How accessible and inclusive is this form?

3. Language and content

  • Is the language easily understood by the target audience?
  • Has unnecessary duplication of effort been eliminated?
  • Is every field, step and requirement truly necessary?

4. Next steps

  • Are applicants told what happens once the funding form has been submitted?
  • Do applicants know how long it will take to be approved or denied?
  • Is drop-off monitored and followed up on?