Race Matters in Funding Small Businesses

"... disparities at startup follow through the operational life of the firm, and they’re not disappearing.” Photograph by John Fedele/Getty Images

Black and Hispanic entrepreneurs start their businesses with less money than whites. Minority businesses rely more on the owner’s personal wealth than on outside lenders or investors. These companies are less likely to apply for bank loans for fear of getting turned down. When they do seek credit, black and Hispanic business owners are less likely to be approved than whites, even after controlling for characteristics like credit score or the type of business. The differences persist for years after companies are founded.

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