Revised City of South Bend Disparity Study Report

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City of South Bend Disparity Study 2020 1. Federal Reserve Board/Small Business Administration Survey of Small Business Finances The Federal Reserve Board and the U.S. Small Business Administration have conducted surveys of discrimination in the small business credit market for 1993, 1998 and 2003. These Surveys of Small Business Finances are based on a large representative sample of firms with fewer than 500 employees. The main finding from these Surveys is that MBEs experience higher loan denial proba- bilities and pay higher interest rates than White -owned businesses, even after controlling for differences in credit worthiness and other factors. Blacks, His- panics and Asians were more likely to be denied credit than Whites, even after controlling for firm characteristics like credit history, credit score and wealth. Blacks and Hispanics were also more likely to pay higher interest rates on the loans they did receive. 152 2. Minority Business Development Agency Report A recent report to the U.S. Department of Commerce summarizes these Fed- eral Reserve/SBA Surveys, results from the Kauffman Firm Survey,"' data from the U.S. Small Business Administration's Certified Development Com- pany/504 Guaranteed Loan Program 154 and additional extensive research on the effects of discrimination on opportunities for MBEs. The most comprehen- sive report of its kind, "Disparities in Capital Access Between Minority and Non -Minority -Owned Businesses: The Troubling Reality of Capital Limitations Faced by MBEs", found that Low levels of wealth and liquidity constraints create a substantial barrier to entry for minority entrepreneurs because the owner's wealth can be invested directly in the business, used as collateral to obtain business loans or use to acquire other businesses.... [T]he largest single factor explaining racial disparities in business creation rates are differences in asset levels."155 Some of the key findings of the Report include: 152. See Blanchflower, D. G., Levine. P. and Zimmerman, D., "Discrimination In The Small Business Credit Market," Review of Economics and Statistics, (2003); Cavalluzzo, CS. and Cava II uzzo, L C. ("Market structure and discrimination, the case of small businesses," Journal of Money, Credit, and Banking, (1998) 153. http://www.kauffman.org/"/media/kauffman_org/research%20reports%20and%20covers/2013/06/kauffmanflrmsur- vey2013.pdf. 154. http://www.sba.gov/category/navigation-structure/loans-grants/small-business-loans/sba-loan-programs/real-estate- and-eq. 155. Fairlie, R. W. and Robb, A., "Disparities in Capital Access Between Minority and Non -Minority -Owned Businesses: The Troubling Reality of Capital Limitations Faced by MBEs," U.S. Department of Commerce, Minority Business Development Agency, 2010, pp. 22-23. 82 0 2020 Colette Holt & Associates, All Rights Reserved.