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Black, Hispanic entrepreneurs discriminated against on small business loans
It’s not easy these days to get a small-business loan.
It’s even harder if your skin isn’t white.
New academic research reveals that minority entrepreneurs are treated significantly differently (see: worse) than their white counterparts when seeking financing for a small business, even when all other variables — their credentials, their companies, even their clothes — are identical.
Conducted by business school professors at Utah State University, Brigham Young University and Rutgers University, the study featured nine businessmen—three white, three black, and three Hispanic. Similar in size and stature, donning the same outfits, and armed with similar education levels and financial profiles, they visited numerous banks seeking a roughly $60,000 loan to expand the very same business.
Once inside the bank, their experiences were not so similar.
The Hispanic and black business owners were provided far less information about loan terms, offered less application help by loan officers, less frequently handed a business card, and asked more questions about their personal finances.
One question they weren’t asked as frequently? Their name.
“If you are white and set out to get financing for an entrepreneurial venture, it might be a tough journey,” Glenn Christensen, a marketing professor at BYU and one of the study’s authors, said in a report by the university. “But, generally speaking, you would experience fewer obstacles and find more help along the way than if you came from an African-American or Hispanic background.”