The Washington Independent
The Washington Independent
Study shows: African-American and Hispanic businesses were half as likely to receive funding as white ones

Study shows: African-American and Hispanic businesses were half as likely to receive funding as white ones

April 21, 2021 | Paolo Reyna
finance

Because of the coronavirus pandemic, minority-owned companies closed at a greater pace and sales loss than did their white counterparts, the Federal Reserve reported in 2008.

From Thursday's study, it seems that businesses run by people of color cut back their activities during the pandemic. If capital was an issue for black-owned companies, they tended to use personal resources or to get into debt.

There is evidence that minority-owned companies and societies may have been disproportionately affected by the COVID-19 pandemic, the researchers pointed out in the study.

Non-essential loans to African-American and Hispanic business owners is half as likely to be accepted as to approve low-risk companies regardless of their race. With lower credit risk, the percentage of black and Hispanic company owners receiving funding was lower by 24% and 25%, respectively, than the corresponding figures for white- and more advantaged entrepreneurs.

The study showed that Black and Hispanic company owners received credit at the same risk level as businesses with a medium to high credit rating, according to credit rating.

Compared to other businesses, black-owned businesses were more adversely affected financially. Of those, 38% took out a loan from a friend or a parent, 25% used their own money, and the rest had to go without.

Any companies with less than 500 workers performed the survey last September and October.

Paolo Reyna | Paolo is a senior at the University of Illinois at Urbana-Champaign, majoring in International Studies with a Latin American emphasis. During the fall semester of 2012, he had the opportunity to study abroad in Peru, which piqued his interest in international growth. He learned about the disparities that impact indigenous peoples, got a taste of Peruvian culture, and improved his Spanish skills. Mitchel interned with the Chicago Council on Global Affairs, conducting research on food security in Latin America, after being inspired by his foreign experience. He wants to work in international development and for a government department, writing legislation. He loves playing intramural basketball and practicing for the Chicago marathon when he is not thinking about current events in Latin America.

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