It's not easy getting a small-business loan these days. It's even harder if you are a minority entrepreneur. New research reveals that non-whites are treated much differently than their white counterparts when looking for a business loan. This happens even when all other variables are identical. The study, conducted by Utah State University, Brigham Young University and Rutgers University, featured nine businessmen—three white, three black, and three Hispanic. They visited numerous banks seeking a $60,000 loan to expand the very same business. Each applicant had similar size and stature, clothing, education levels and financial profiles.
Glenn Christensen, a marketing professor at BYU and one of the study's authors said their experiences weren't similar at all.
[Glenn Christensen audio comment]
A report last year found that Hispanic and black entrepreneurs tend to start their companies with less money than whites and they rely more heavily on their own assets than on banks or investors. The study found when they do seek bank financing, they are less likely to be approved than whites, even when considering factors like credit history and business type.
Even when they are approved for a loan minorities aren't on a level playing field. Recent data shows minority business owners pay interest rates on average 32 percent higher than what their white counterparts pay.
With the number of minority owned businesses climbing rapidly this also has an effect on the broader economy.
SBA Sr. Manager, Stephen Hart, says the SBA has specific programs to help minority business owners gain access to capital.
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