Availability of credit to small and minority-owned businesses: Evidence from the 1993 National Survey of Small Business Finances

Rebel Cole

MPRA Paper from University Library of Munich, Germany

Abstract: This article analyzes factors influencing the decisions of prospective lenders to extend credit to small and minority-owned businesses. Using data from a government survey of small businesses, the analysis reveals that prospective lenders (primarily commercial banks)are four times more likely to deny credit to firms owned by African-Americans than to firms owned by Non-Hispanic whites, and are twice as likely to deny credit to firms owned by Asian-Americans than to firms owned by Non-Hispanic whites. These differences in denial rates remain both statistically and economically significant, even after controlling for differences in the type and size of the prospective loan; in the age, experience, education, and creditworthiness of the firm’s primary owner; in the age, size, capital structure, profitability, organizational form, creditworthiness, and industry of the firm; and in the types and length of pre-existing relationships between the firm and its prospective lender. Interestingly, these differences in denial rates are significant only when the prospective lender is a commercial bank.

Keywords: bank; credit; discrimination; race; small business; SSBF (search for similar items in EconPapers)
JEL-codes: G21 G28 J15 (search for similar items in EconPapers)
Date: 1999-03-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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