Is There a Liquidity Crisis for Small, Black-Owned Firms?
Vol. Volume 10, Number 1 April/2005
Loans and trade credit are major sources of short-term debt and
liquidity for small firms. This article uses data from the 1998 Survey
of Small Business Finances to compare the borrowing experience of small
firms owned by black men to those owned by white men. Results reveal
that black firm owners were more dependent on loans from non-bank
sources than white owners. Black men were significantly more likely to
have been turned down for their most recent loan and were more likely
to be discouraged from applying for loans. Results also reveal that
black men were more likely to be turned down for trade credit. Overall,
these findings seem to suggest that firms owned by black men have a
more difficult time securing sources of short term debt than those
owned by white men.