Small Business Loan Turndowns, Personal Wealth, and Discrimination

Ken Cavalluzzo and John Wolken ()
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Ken Cavalluzzo: Wisconsin Capital Management

The Journal of Business, 2005, vol. 78, issue 6, 2153-2178

Abstract: We examine the impact of personal wealth on small business loan turndowns across demographic groups. Information on home ownership, home equity, and personal net worth, in combination with a rich set of explanatory variables, furthers our understanding of the credit market experiences of small businesses across demographic groups. We find substantial unexplained differences in denial rates between African-American-, Hispanic-, Asian-, and white-owned firms. We find that greater personal wealth is associated with a lower probability of loan denial. However, even after controlling for personal wealth, large differences in denial rates across demographic groups remain.

Date: 2005
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Working Paper: Small business loan turndowns, personal wealth and discrimination (2002)
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