How This Act Changed the Game for Women Business Owners

Yulia Gusterina /

The passing of the H.R. 5050: Women’s Business Ownership Act of 1988 forever changed the way women do business. It was the first legislation to recognize the importance of female entrepreneurs in the national economy. Until the passing of the act, women business owners were not allowed to take out business loans in their own name.

Read: How To Support Women-Owned Small Businesses
Find Out More: 3 Money Moves Women Business Owners Should Be Making Right Now

More than 30 years after the act’s passing, let’s review the significant and positive changes that have allowed women business owners to succeed because of H.R. 5050.

How Did Women Business Owners Get Loans Before H.R. 5050?

Before the enactment of H.R. 5050, women entrepreneurs were not allowed to take out business loans in their own name. Instead, women business owners were required to have a “male relative” as a co-signer on their business loans. The definition of male relative was loose in nature — a woman’s husband could be her co-signer or her own child could co-sign a business loan as long as the child was male. 

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There weren’t any laws that prohibited women entrepreneurs from taking out their own business loans at the time. Rather, loans were simply not issued to women who wished to finance their own businesses. This subjected women to discrimination in entrepreneurial endeavors because of their gender. Women business owners could not take out business loans or obtain business credit in their own name, denying them basic acts of financial independence.

See: How the Pandemic Amplified the Challenges of Women Entrepreneurs

The Introduction of the H.R. 5050: Women’s Business Ownership Act

In 1988, studies were conducted by multiple agencies to determine the landscape for the state of affairs for women in business. Findings revealed that women business owners could indeed contribute to the economic growth of the United States. However, women business owners faced challenges in obtaining the funding necessary to start and open their businesses. In addition, women were required to meet a higher standard of personal net worth compared to their male counterparts. 

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New laws were drafted that allowed women business owners to take out business loans in their own name. The H.R. 5050: Women’s Business Ownership Act of 1988 was an act introduced by Rep. John LaFalce, a former New York congressman. Findings from the conducted studies are cited in the act, including Title 1, Sec. 101, subsection A: “women owned business [have] become a major contributor to the American economy by providing goods and services, revenue and jobs.”

Former President Ronald Reagan then signed the H.R. 5050: Women’s Business Ownership Act into law. The act was passed in 1988 with the help of the National Association Women Business Owners (NAWBO). 

H.R. 5050’s Major Changes For Women in Business

What did passing this act into law achieve for women business owners? H.R. 5050 was a critical piece of legislation that acknowledged the importance of female-owned businesses. The act eliminated discriminatory lending practices where a male business owner might be favored over a female business owner. 

H.R. 5050 also helped enact lasting changes that would significantly impact women entrepreneurs. 

  • Women were allowed to take out business loans in their own names. All individual state laws that required a male relative to act as a co-signer were eliminated under H.R. 5050.
  • Proper recognition was given to C Corporations. A C Corporation is a legal structure for a corporation in which its owners are taxed separately from the entity formation. Women who own C Corporations are now counted and included in data on women-owned firms by the U.S. Census Bureau.
  • The Women’s Business Center (WBC) program was established. In 1989, there were only four Women’s Business Centers in the United States. Today, there are more than 100 centers across the nation.
  • The National Women’s Business Council (NWBC) was created as an H.R. 5050 requirement. This is a council of female entrepreneurs that reports annually to the president and Congress on policy and program recommendations.
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The Road Ahead for Women Business Owners

In 1992, the number of women-owned businesses rose to 6.4 million. Today there are more than 11.6 million firms owned by women across the U.S., according to NAWBO statistics. Women-owned businesses now contribute to 8% of employment and 4.2% of revenues. 

The passing of H.R. 5050 has created tremendous forward progress for women business owners. While this act celebrates how far female entrepreneurs have come, it also acknowledges that there is still work that needs to be done. We must continue the fight for equality and seek to create even more opportunities that meet the needs of every female business owner together.

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About the Author

Heather Taylor is a senior finance writer for GOBankingRates. She is also the head writer and brand mascot enthusiast for PopIcon, Advertising Week’s blog dedicated to brand mascots. She has been published on HelloGiggles, Business Insider, The Story Exchange, Brit + Co, Thrive Global, and more media outlets. 

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