Discrimination in Access to Finance: Evidence from the United States Small Business Credit Market

This paper investigates the racial and gender discrimination in the United States small business credit market, and further examines the causes of discrimination. Specifically, this study focuses on new credit line approval, credit line renewal provided by financial institutions and trade credit provided by suppliers. Using data from the 2003 Survey of Small Business Finances (SSBF), I find that in new credit line approval, black owned businesses face unfair outcomes; while in credit line renewal, women owned firms are slightly favored by lenders. In trade credit approval, no minority owned firms appear to be discriminated against. I also present evidence that discrimination against minority groups is mostly likely to be based on statistical reasons instead of prejudice