AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
Are Loans to Minority-Owned Firms Mispriced?
AEA Papers and Proceedings
(pp. 477–82)
Abstract
We use survey data on small business loans granted in 2022 and 2023 to explore racial disparities in the terms of loans to small firms. Similar data have not been available since the 2003 Survey of Small Business Finances. We find that for Hispanic-, Asian-, and Black-owned firms, the interest rate paid was higher than for comparable White-owned firms, after considering the controls for risk that determine the interest rate on loans. Another component of credit is collateral. We find that cosignatures from third parties are required more frequently for minority firms than is justified by our economic analysis.Citation
Bradford, William D., Chunbei Wang, Magnus Lofstrom, and Michael Verchot. 2025. "Are Loans to Minority-Owned Firms Mispriced?" AEA Papers and Proceedings 115: 477–82. DOI: 10.1257/pandp.20251122Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- J15 Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
- L25 Firm Performance: Size, Diversification, and Scope