Minority-owned businesses were more likely to report financial challenges compared to white-owned businesses, according to a study released today by the Federal Reserve Bank of Atlanta. According to the study—which draws upon data from the annual Small Business Credit Survey—78% of black-owned firms and 69% of Asian- and Hispanic-owned firms reported facing financial challenges, compared to 62% of white-owned businesses.
Among the top challenges faced by minority-owned firms were paying operating expenses, credit availability and making payments on debt. Black-owned firms were the most dependent on personal funds to address financial challenges, and the least likely to take out additional debt.
When it came to applying for credit, black- and Hispanic- owned firms were more likely to apply to large banks than white-owned firms were. They were also more likely to apply at online lenders than white-owned firms: 32% of white-owned businesses applied to online lenders, compared to 41% and 43% of black- and Hispanic-owned businesses, respectively. While minority-owned businesses saw the higher approval rates from online lenders than from banks, these businesses reported being less satisfied with online lenders than with banks.