Lending technologies, lending specialization, and minority access to small-business loans

Lending technologies, lending specialization, and minority access to small-business loans We investigate minority access to small-business loans using a probit model of loan application denial that recognizes two loan types (line-of-credit loans and non-line-of-credit loans) made by two lender types (commercial banks and nonbank financial institutions). We estimate our model on data from the 1998 Survey of Small Business Finances. We find evidence consistent with minority equal access to bank credit lines and nonbank non-line-of-credit loans in highly competitive loan markets; in less competitive markets we find evidence consistent with unequal access to these loans. We also find evidence consistent with unequal minority access to bank non-line-of-credit loans, regardless of loan market competitiveness. Our findings differ from previous research which treats small-business loans as a homogenous product and finds evidence consistent with unequal minority access to small-business loans generally. We argue that the existence of multiple small-business lending technologies and loan specialization by lenders account for our findings and demonstrate the need to treat small-business loans as a heterogeneous product when investigating equal access to small-business credit. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

Lending technologies, lending specialization, and minority access to small-business loans

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Publisher
Springer US
Copyright
Copyright © 2009 by Springer Science+Business Media, LLC.
Subject
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1007/s11187-009-9243-1
Publisher site
See Article on Publisher Site

Abstract

We investigate minority access to small-business loans using a probit model of loan application denial that recognizes two loan types (line-of-credit loans and non-line-of-credit loans) made by two lender types (commercial banks and nonbank financial institutions). We estimate our model on data from the 1998 Survey of Small Business Finances. We find evidence consistent with minority equal access to bank credit lines and nonbank non-line-of-credit loans in highly competitive loan markets; in less competitive markets we find evidence consistent with unequal access to these loans. We also find evidence consistent with unequal minority access to bank non-line-of-credit loans, regardless of loan market competitiveness. Our findings differ from previous research which treats small-business loans as a homogenous product and finds evidence consistent with unequal minority access to small-business loans generally. We argue that the existence of multiple small-business lending technologies and loan specialization by lenders account for our findings and demonstrate the need to treat small-business loans as a heterogeneous product when investigating equal access to small-business credit.

Journal

Small Business EconomicsSpringer Journals

Published: Dec 10, 2009

References

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