Hispanic Businessmen Treated Worse By Banks Than Non-Hispanic Whites, According to New Case Study

A case study by business school professors at Brigham Young University (BYU), Utah State and Rutgers has found that Latino entrepreneurs seeking bank loans are not treated equally.

"There is a general belief among Americans that we're the land of opportunity and that anyone can pull themselves up by their bootstraps," said study co-author Glenn Christensen, an associate professor of marketing at BYU. "It is a land of opportunity, but that opportunity is not always equally accessible."

The researchers, reports the Washington Post, sent out three white, three black, and three Hispanic businessmen to get a $60,000 loan for expanding their business. To keep all other variables constant, all nine businessmen had similar education and financial profiles, wore the same attire and were even the same size and build.

The findings of the study were loud and clear: Minority businessmen were treated unequally by their loan officers. Specifically, they are given less information and asked more questions about their personal finances than non-Hispanic white loan applicants.

“If you are white and set out to get financing for an entrepreneurial venture, it might be a tough journey,” said Christensen in a report by the university. “But, generally speaking, you would experience fewer obstacles and find more help along the way than if you came from an African-American or Hispanic background.”

The conclusions from this academic report can explain the findings of last year's report from the Small Business Administration, which revealed that minority entrepreneurs were significantly more likely to use personal capital for expanding their business than non-minorities.

Taking into consideration that data from the Brookings Institution has found that the entrepreneurship is at a three-decade low in the country, the uphill battle Latinos face could be a problem. Entrepreneurship is important to the American economy, as it creates jobs and plays an important role in sustaining economic growth. Taking that into consideration, the Brookings Institution report advises that measures be taken to change the slow growth of entrepreneurship.

A new report from the Kauffman Foundation -- titled "Entrepreneurial Activity 1996-2013" -- found that U.S. Latinos are twice as likely to initiate and start their own business than the average American. The study cites that the rate of entrepreneurship for Latinos in 2013 was the highest in the country at 0.38 percent -- this value is higher than the 0.27 percent for non-Hispanic whites, 0.19 percent for African Americans, and 0.28 percent for Asians.

The growing Latino population -- according to Pew Research Center, there are almost 52 million Hispanics/Latinos in America -- and their entrepreneurial activity, coupled with the declining entrepreneurial spirit seen in the country over the past decades, raises an important question regarding the potential role Latinos will play in the nation's economic growth. After all, the Kauffman Foundation report found that new Latino entrepreneurs increased from 16 percent in 2003 to 20.4 percent in 2013 and a growing immigrant population and rising entrepreneurship rate contributed to a rise in the share of new immigrant entrepreneurs.