Small Businesses being rejected by Banks when asking for loans. Whats your Idea?2006: According to Federal Reserve, bank loan applications of African-Americans and Hispanics owned businesses are rejected at twice the rate of white owned businesses. College Text Book Page 163 Boone and Kurtz "Contemporary Business". With That being said, whats your Idea. With hispanics... |
Statistics can 'prove' anything, but I think the primary reason is the lack of long standing banking relationships and business knowledge. I do agree with not having a viable business plan prevents many from getting loans from banks, because banks are in business to make money (no, they aren't there to hold yours). Minorities on average do not trust banks, therefore loan officers only have what is in black and white presented to them - that comes to a full business plan with projections and solid basis for the financial profitability behind the projections.
Catering to 'your own people' may sound good in theory, there's nothing wrong with it. But to operate a profitable business, it's not about 'your own people', it's about who has the money to buy what you are going to sell.
I have my own business and did not get a bank loan. But I have also been doing business with the same bank over 5 years, and opened another account 2 years ago with another. What I qualify for is a business line of credit (which I politely turned down).
Getting a loan to start a business is some of the worse advice I have heard given to small business owners.
in terms of hispanics i've heard on a show(30 Days on FX) that one illegal immigrant wanted to start his own business and he was going to hire more hispanics(whether they are legal or illegal) to help his people out.
-guess it doesnt really matter because a lot of business no matter who owns them hire illegal immigrants but that might be something banks might look at.
another thing is just because you know what people want doesnt mean your business will last. it takes not only knowing your customers demands but catering to them, hiring people, pricing, keeping track of all the business aspects. if anybody goes to the bank for a loan even if they have a great idea without a good business plan/model they'll get rejected.
plus you know the stereotypes about minorities paying their bills.
not justifying banks actions if they are rejecting applicant for being black or hispanic....because its stupid to base things off of ethnicity but just trying to play the devil's advocate
