The Washington Post: Banking while black: Minority business owners with better credit scores than white counterparts face worse treatment and more scrutiny

The Washington Post, September 6, 2019: Banking while black: Minority business owners with better credit scores than white counterparts face worse treatment and more scrutiny

Black and Hispanic men seeking small business loans faced more scrutiny and worse treatment from bank officers than less qualified white men, according to a study released this week by the National Community Reinvestment Coalition.

The results demonstrate the challenges minority entrepreneurs face when trying to access additional capital to expand their businesses. The study also found declines in government-backed lending to black business owners, dropping from 8 percent to 3 percent of small-business loans between 2008 and 2016.

The organization sent teams of white, black and Hispanic “mystery shoppers” who acted as prospective borrowers to evaluate customer service interactions with the banks’ small business lending representative at 60 Los Angeles area banks. The testers had nearly identical business profiles and strong credit histories, with black and Hispanic testers possessing slightly better incomes, assets and credit scores than their white counterparts.

In almost every measure, white testers received superior customer service, the study found. Bank representatives asked white prospective borrowers fewer questions about eligibility and provided them more information about loan products.

“It’s a cultural, civil rights and business problem that should be relegated to history, but instead it’s still a factor in who gets access to capital,” said Jesse Van Tol, chief executive of the National Community Reinvestment Coalition. “This is exacerbating the nation’s profound racial wealth divide.”

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