The State of Minority- and Women- Owned ... - Cleveland.com

Statistical Disparities in Capital Markets
3. Differences in Interest Rates, Credit Card Use, and Failure to Apply for Fear
of Denial
Table 6.27 models the interest rate charged for those minority-owned and nonminority femaleowned
firms that were able to successfully obtain a loan (comparable to Tables 6.13 and 6.14 for
1993 and Table 6.21 for 1998). As was found in earlier surveys, African American business
owners are hurt here as well since they have to pay, on average, 1.05 percentage points more for
their loans than nonminority male business owners with identical characteristics. Hispanic
business owners, as well, pay 0.99 percentage points more than their nonminority male
counterparts.
Table 6.27 shows that the loan price differential is present for African American and Hispanic
business owners in the ENC as well. Table 6.27 shows that Hispanic business owners in the ENC
may pay 1.44 percentage points more for their loans, on average, than comparable nonminority
male business owners. For African American business owners, the differential is 0.83 percentage
points but is not strongly significant.
Table 6.28 reports the results of estimating a model where the dependent variable is whether a
business or personal credit card is used to pay business expenses (comparable to Tables 6.11 and
6.12 for 1993 and Table 6.23 for 1998). As noted above, the application procedure for business
and personal credit cards is usually automated and not conducted face-to-face. If there were
missing variables such as creditworthiness or some such characteristic unobserved to the
econometrician, then the race and ethnicity indicator variables should enter significantly in these
equations. Unlike earlier years, there is some evidence that African Americans are less likely to
use personal credit cards for business expenses. However, this result is not observed for business
credit cards, nor is it observed in the ENC.
Table 6.27. Models of Interest Rate Charged
Source: See Table 6.24.
Specification
1a) All Loans (as in
Column 5 of Table
6.25) n=1,537
1b) All Loans (as in
Column 5 of Table
6.26) n=1,537
African
American
1.046
(2.02)
0.833
(1.39)
Asian/
Pacific
Islander
0.430
(1.20)
0.330
(0.78)
Hispanic
0.991
(2.72)
1.440
(3.22)
Native
and
Other
0.260
(0.35)
0.475
(0.51)
Nonminority
Female
-0.148
(0.75)
-0.332
(1.47)
Notes: (1) Each line of this table represents a separate regression with all of the control variables as indicated. (2)
Additionally, controls were included for whether the loan required a co-signer or guarantor, whether collateral was
required and, if so, the type of collateral required. (3) The sample consists of firms that had applied for a loan and
had their application approved.
NERA Economic Consulting 229