Mentors help small business owners better understand financing—but not everyone benefits equally

Mentors can help small business owners gain a better understanding of financing. A new study shows that business owners with mentors are more likely to be aware of both public and private financing initiatives. However, the study also shows that the benefits of mentoring vary between different groups.

For small business owners, it is difficult to know what funding support is actually available. Public support, industry initiatives, and private funding programs can be hard to navigate—particularly for entrepreneurs who lack strong networks or privious experience of financing.

In a new study, researchers are investigating whether entrepreneurs with mentors have greater awareness of various various funding schemes. The study is based on data from the UK SME Finance Monitor, a recurring survey of small and medium-sized enterprises in the United Kingdom.

The researchers analyze awareness of two types of support: public funding initiatives and industry-led initiatives from the private financial sector. They are also examining whether there are differences between women and men, as well as between entrepreneurs from different ethnic backgrounds.

Mentors provide better insight into support schemes

The results show that entrepreneurs with mentors are more likely to be aware of funding initiatives than entrepreneurs without mentors. The difference is particularly clear when it comes to private initiatives.

One possible explanation, according to the researchers, is that private financing initiatives are often newer and more complex than public support. Here, the mentor can act as a knowledge resource, helping the entrepreneur understand what opportunities are available and how they can be utilized.

Mentoring reduces certain gaps—but does not create equality

At the same time, the study shows that the picture is more complex. When the researchers analyze gender and ethnicity separately, no clear difference emerges between women and men in terms of their awareness of funding support. However, there is a clearer difference linked to ethnic background.

Entrepreneurs from minority backgrounds generally have less awareness of funding initiatives than entrepreneurs of white British or Irish background. Mentoring can partially bridge this information gap. For certain groups, the mentor thus becomes a compensatory resource that provides knowledge which might otherwise be difficult to access.

Women from minority groups seem to benefit the most

One of the study’s clearest findings concerns women from minority groups. They appear to benefit particularly from mentoring when it comes to knowledge of funding support.

However, the same pattern is not evident among men from minority groups. They have less awareness of funding initiatives than other groups and also appear to benefit less from mentoring than women from minority groups.

According to the researchers, there may be several possible explanations. One has to do with how power, gender, and ethnicity interact in support relationships. Certain groups may face specific barriers when engaging with advisors and mentors, or find it more difficult to utilize support in the way that mentoring requires.

One solution does not fit all

The study shows that mentoring can increase small business owners’ knowledge of funding initiatives. However, it also shows that mentoring is not a one-size-fits-all solution.

For business support to be more effective, those who design and deliver them need to understand how gender, ethnicity, and relational networks interact. Otherwise, there is a risk that initiatives intended to increase access to financing will, in practice, continue to benefit certain groups more than others.

About the article and the authors
The article “Mentoring, Intersectionality, and Awareness of SME Finance Initiatives” is published in the academic journal Small Business Economics.

The authors are Samuel Mwaura, University of Edinburgh; Stephen Knox, University of Stirling; and Sara Carter, University of Glasgow, all from the United Kingdom.