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A new poll finds that Black small business leaders in Massachusetts disproportionately report being rejected when applying for financing.

The MassINC Polling Group conducted the multilingual survey of 1,818 small business leaders in the state over February and March. The survey was sponsored by the Coalition for an Equitable Economy, with sponsorship from the Mass Growth Capital Corporation and Eastern Bank Foundation.

The survey found that while getting access to capital was an outsized priority for Black- and Latino-owned businesses, 47 percent of white-owned businesses got all the capital they applied for compared to 35 percent of Asian-owned firms, 34 percent of Latino-owned firms and 31 percent of Black-owned firms.

In addition, 42 percent of Black small business leaders reported being rejected when applying for loans or other non-grant types of financing compared to 27 percent of Asian small business leaders, 25 percent of white small business leaders and 24 percent of Latino small business leaders. A higher-than-normal share of Black small business leaders reported a “lack of connections” kept them from accessing financing, versus 13 percent of Asian small business leaders, 11 white small business leaders and 6 percent of Latino business leaders.

Higher interest rates on loans were an obstacle for 51 percent of white-owned businesses looking for financing, versus 45 percent of Asian-owned businesses, 43 percent of Black-owned businesses and 41 percent of Latino-owned businesses.

Part of the disparities might be down to the stage of life many white- and Asian-owned small businesses in the survey are in, MassINC said in its announcement. Many of those firms are owned by older individuals with an eye on retirement and potentially closing their business, whereas many Black- and Latino-owned businesses in the survey were newer and focused on growing. Only 40 percent of businesses where an owner was anticipating retirement in the next five years had a succession plan, the poll found.

But existing lending practices also play a role, said Tracye Whitfield, executive director of the Coalition for an Equitable Economy. In an interview with Banker & Tradesman, she urged banks to examine their credit criteria and incorporate “relationship-based” lending standards that rely less on credit scores and other types of traditional metrics that might not offer an accurate representation of a borrower’s ability to repay. In addition, banks should continue to look to make sure their business banking teams are “as diverse as their applicants” to help guard against potential bias driven by cross-cultural misunderstandings or other factors.

Image courtesy of The MassINC Polling Group