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(EMAILWIRE.COM, May 08, 2013 ) San Francisco, CA -- Banks appear to believe that women and minorities are simply a larger risk when it comes to small business loans. At least, that is what the numbers from the Small Business Administration seem to indicate.
According the latest findings, even when possible mettling factors are removed including credit score and industry type, African Americans, Hispanics, and female business owners were less likely than white males to find approval for their loan applications.
The research not only noted that they were less likely to receive a green light, but also that the minority business had to rely on more money, and less on outside capital, than white-male owned companies.
Due to such factors, African Americans, Hispanics, and women now end up operating under more stringent flexibility when it comes to budgetary wiggle-room. The findings also indicate that this is true for start-up and established businesses (within the first decade).
“Level of startup capital is a strong predictor of business success,” the SBA wrote, referencing two earlier studies on the topic.
Asians were handled separately from African Americans and Hispanic businesses due to their levels of wealth being similar to white businesses on the average. Earlier studies had stated that found assess were among the most important factors for consideration creation of a business, and would help explain African American and Hispanic businesses being created less often than white businesses in the United States.
Another factor that surely played a role in the recent findings is the economic downturn that was experienced in the United States. During tougher economic times, any statistical negative effect will be exacerbated, while any positive possibility is minimized. The SBA study noted that banks made “flight to quality”, which is another way of stating that investments in older and more established firms were chosen over new or fledgling endeavors.
Analysts still made a point to warn that such maneuvers have serious implications on economic recover. African Americans and Hispanics had less experience in start ups in the tech industry, which was considered one of the strongest in economic recover. That fact hurt them when pitted against white males looking to start a company in the same industry, which was the most likely to attain green-light status.
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