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The purpose of this paper is to answer whether the female-owned smallest firms differ from their male-owned counterparts in terms of their success and performances; if so, whether it affects banks’ loan approval decisions.

The study uses the Kauffman Firm Survey – the largest and longest longitudinal data which contain 4,928 new firms that started their business in the USA in 2004. The authors use two measures of median asset values to classify firms into smallest firm category. They use multiply imputed logit estimates to predict the probability of loan approval in each category.

The results show that female-owned smallest firms have significantly lower rate of loan approval. In addition, the study finds minority women owners face double burden. However, married women have significantly higher probability of loan approval. The authors’ results are robust.

From a public policy perspective, providing equal access to credit to women business owners, especially unmarried and/or minority women, may solve the puzzle why female-owned firms are so small.

Although many studies examined why businesses owned by women are typically smaller compared to men-owned firms, there exist limited studies on female-owned smallest firms and why they stay smaller. This study fills the gap in the literature by examining female-owned smallest businesses.