Small business loan turndowns, personal wealth, and discrimination

We examine the impact of personal wealth on small business loan turndowns across demographic groups. Information on home ownership, home equity, and personal net worth, in combination with a rich set of explanatory variables, furthers our understanding of the credit market experiences of small businesses across demographic groups. We find substantial unexplained differences in denial rates between African- American-, Hispanic-, Asian-, and white- owned firms. We find that greater personal wealth is associated with a lower probability of loan denial. However, even after controlling for personal wealth, large differences in denial rates across demographic groups remain.