Capital Brief: Survey:Few Minority Entrepreneurs Seek Loans

Data from a Greenlining Institute survey suggest that minority small-business owners may be at least partially responsible for the scarcity of bank credit in inner-city areas.

The poll found that 86% of minority businesses in South Central Los Angeles and Orange County, Calif., did not seek bank loans in 1995 or 1996. Of these businesspeople, four out of five said they did not apply because they believed a bank would reject the application.

Greenlining, a California-based coalition of community groups, did not gather comparable data for white-owned businesses.

Of the 700 minority entrepreneurs surveyed from December 1997 through March 1998, 92% had been in business for more than three years and 59% had annual sales exceeding $100,000.

Robert Gnaizda, Greenlining's general counsel, said the results buttress the group's call for the Federal Reserve Board to let banks voluntarily collect data on the race and gender of small-business borrowers. The Fed is expected to decide early next year whether to issue such a proposal.

Without race and gender data, banks are unable to target products to minority businesses, Mr. Gnaizda said. "Banks have to aggressively market loans," he said. "But they won't do it unless they can check the results. They need to be able to tell if it was successful."

The group also asked the Federal Reserve Bank of San Francisco to conduct a larger version of the poll. Copies of the survey were sent to the Fed and the Office of the Comptroller of the Currency.