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Potential Lending Discrimination? Insights from Small Business Financing and New Venture Survival

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  • Shaoming Cheng

Abstract

Previous literature provides potential lending discrimination evidence of disadvantaged women and minority entrepreneurs' high rate of business loan application denial and their unequal access to external and commercial credits in comparison with white business owners. This paper aims to expand the literature and discussions on small business loan discrimination from a new research direction, besides those on loan applications/denials and on loan terms, focusing on the consequences of small business loans in terms of new venture survivability. The proposed new research direction is consistent with similar research approaches in mortgage lending literature examining loan default rates and potential discrimination. The auffman irm urvey data are used with appropriate hazards model for the analysis. Extensive creditworthiness and business survival determinants are applied for controlling for their influences across racial and ethnic groups. The main empirical finding is that after controlling for a wide variety of borrower, establishment, and regional characteristics, business closure rates for minority entrepreneurs are not higher than those for white business owners. This finding does not support the prediction of the model for lender bias against minority entrepreneurs.

Suggested Citation

  • Shaoming Cheng, 2015. "Potential Lending Discrimination? Insights from Small Business Financing and New Venture Survival," Journal of Small Business Management, Taylor & Francis Journals, vol. 53(4), pages 905-923, October.
    • Handle: RePEc:taf:ujbmxx:v:53:y:2015:i:4:p:905-923
    DOI: 10.1111/jsbm.12112
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    Cited by:

    1. Ken B. Cyree & Drew B. Winters, 2023. "Investigating bank lending discrimination in the US using CRA-rated banks’ HMDA loan data," Public Choice, Springer, vol. 197(3), pages 371-395, December.
    2. Andreas Fürst & Mika Gabrielsson & Peter Gabrielsson & Jana-Kristin Prigge, 2023. "The role of marketing in new ventures: How marketing activities should be organized in firms’ infancy," Journal of the Academy of Marketing Science, Springer, vol. 51(5), pages 966-989, September.

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