NCPA - National Center for Policy Analysis

Minority Firms' Access To Capital

March 21, 2000

Financing is difficult for small businesses, but access to capital can be especially difficult for minority-owned firms, according to the Federal Reserve.

  • A 1999 working paper from the Federal Reserve found that 28.7 percent of small businesses had been denied a loan in the past three years.
  • About a third of small Hispanic companies say they've been turned down for a loan.
  • And more than half of black-owned firms have been turned down.

Minority firms are more apt to say they fear credit rejection. But the Fed's data show that white females are only slightly more likely to be turned down than white men, and black women are actually turned down at a much lower rate than black men -- 52.5 percent, compared with 68.5 percent for black men.

While race may be a factor in this "capital access gap," poor credit history was by far the top answer small business owners gave when asked why they feared credit rejection, regardless of race or sex.

Source: Charles Oliver, "Funds for Minority-Owned Firms: Banks Are Wary, So Government Steps In," Investor's Business Daily, March 21, 2000.


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