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Report: New High Tech Businesses Rely More Than Other Firms on Bank Loans
Advocacy Study Shows Women and Minority-owned Businesses Operate on Less Financing
WASHINGTON –In the current financial climate, new high-tech businesses rely more than other firms on outside loans and investments, while non-technology businesses owned by African Americans, Latinos, and women simply operate on less capital, says a report issued today by the U.S. Small Business Administration (SBA) Office of Advocacy. The report, called Access to Capital among Young Firms, Minority-owned Firms, Women-owned Firms, and High-tech Firms looks at how the changing financial environment affects new firms.
“We know that startup businesses with access to financing drive innovation, job creation, and economic growth,” said Dr. Winslow Sargeant, Chief Counsel for Advocacy. “Policies that help close the financing gaps for minorities and women and for high-tech startups will benefit the whole economy.”
The author, Alicia Robb, finds that minority firms in particular rely more on their own funds—and have less capital to start up and grow. High-tech businesses that rely on patents, copyrights, and trademarks also faced bank financing hurdles, possibly because their products rely on knowledge, which is harder for banks to assess than physical assets.
The report uses data from the Kauffman Firm Survey to look at new businesses’ access to capital during the 2004-2010 period. African American and Latino owners of young firms are less likely than others with similar credit scores to have access to bank financing. During the financial crisis, women and minority owners of new startups were less likely to apply for credit, fearing loan denial.
The Office of Advocacy, an independent office that serves as the voice for small business within the federal government, sponsored the report. The full report is available on the Office of Advocacy website at http://www.sba.gov/advocacy/7540.
The Office of Advocacy of the U.S. Small Business Administration (SBA) is an independent voice for small business within the federal government. The presidentially appointed and Senate confirmed Chief Counsel for Advocacy advances the views, concerns and interests of small business before Congress, the White House, federal agencies, federal courts and policymakers. Regional advocates and an office in Washington, D.C., support the Chief Counsel’s efforts. For more information, visit www.sba.gov/advocacy, call (202) 205-6533 or get updates on Twitter (@AdvocacySBA) or Facebook at www.facebook.com/AdvocacySBA.