Are Loans to Minority-Owned Firms Mispriced?

William D. Bradford, Chunbei Wang, Magnus Lofstrom and Michael Verchot

AEA Papers and Proceedings, 2025, vol. 115, 477-82

Abstract: We use survey data on small business loans granted in 2022 and 2023 to explore racial disparities in the terms of loans to small firms. Similar data have not been available since the 2003 Survey of Small Business Finances. We find that for Hispanic-, Asian-, and Black-owned firms, the interest rate paid was higher than for comparable White-owned firms, after considering the controls for risk that determine the interest rate on loans. Another component of credit is collateral. We find that cosignatures from third parties are required more frequently for minority firms than is justified by our economic analysis.

JEL-codes: D22 G21 G32 J15 L25 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/pandp.20251122

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