Fed Small Business Survey Finds Credit Disparities Persisted for Firms Owned by People of Color; Most Firms Reporting Increased Financial Challenges

Businesses owned by people of color continue to face more financial and operational challenges than their white-owned counterparts, according to the Small Business Credit Survey 2022 Report on Firms Owned by People of Color.

Among the Key Findings:

• Firms owned by people of color were more likely than white-owned firms to report that revenues had not yet recovered from the effects of the COVID-19 pandemic.
• Firms owned by people of color disproportionately reported difficulties accessing the funding needed to overcome their financial challenges and continued to report lower approval rates than their white-owned counterparts.

Performance and Expectations:

• Seventy-nine percent of Asian-owned firms reported that their revenues had not yet reached 2019 levels compared to 72% of Black-owned firms, 67% of Hispanic-owned firms, and 59% of white-owned firms.
• Thirty-nine percent of Asian-owned firms reported that their business was in poor financial condition at the time of the survey, as did 36% of Black-owned firms, 28% of Hispanic-owned firms and 17% of white-owned firms.

Pandemic-Related Financial Assistance:

• In 2021, firms owned by people of color were more likely to seek pandemic-related financial assistance than white-owned firms.
• Seventy percent of white-owned firms in 2021 received all of the PPP funding for which they applied. The same was true for just 55% Asian-owned firms, 44% of Hispanic-owned firms, and 31% of Black-owned firms.
• Firms owned by people of color were more likely than white-owned firms to report not applying for pandemic-related financial assistance, despite needing the funding.

Access to Credit:

• Applicant firms owned by people of color were half as likely as white-owned applicant firms to report that they received all the traditional financing they sought.
• Firms owned by people of color were half as likely as white-owned firms to be fully approved for a loan, line of credit, or cash advance at a small bank and approximately a third as likely to be fully approved at a nonbank finance company.

This report is a follow-up to the Small Business Credit Survey 2021 Report on Firms Owned by People of Color. This publication highlights key data from the 2021 SBCS across Asian-, Black-, Hispanic-, and white-owned businesses.

About the Small Business Credit Survey (SBCS)

The SBCS collects information about business performance, financing needs and choices, and borrowing experiences of firms with fewer than 500 employees. These firms represent 99.7% of all employers.

Responses to the SBCS provide insight into the dynamics behind aggregate lending trends and about noteworthy segments of small businesses. The results are weighted to reflect the full population of small businesses in the United States. The SBCS is not a random sample; therefore, results should be analyzed with awareness of potential methodological biases.

The SBCS includes experiences from firms across all 50 states and the District of Columbia through collaboration of all 12 Federal Reserve Banks. In addition to the 10,914 firms with between 1 and 499 employees included in the report, the 2021 survey yielded 6,834 responses from nonemployer firms. These findings will be explored in a separate forthcoming report.

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell, doug.campbell@clev.frb.org, 513.218.1892