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Why Have Lending Programs Targeting Disadvantaged Small-Business Borrowers Achieved So Little Success in the United States?

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  • Bates, Timothy

    () (Wayne State University, Detroit)

  • Lofstrom, Magnus

    () (Public Policy Institute of California)

  • Servon, Lisa

    () (The New School)

Abstract

Small business lending programs designed to move disadvantaged low-income people into business ownership have been difficult to implement successfully in the U.S. context. Based in part on the premise that financing requirements are an entry barrier limiting the ability of aspiring entrepreneurs to create small businesses, these programs are designed to alleviate such barriers for low net-worth individuals with limited borrowing opportunities. Our analysis tracks through time nationally representative samples of adults to investigate the role of financial constraints and other factors delineating self-employment entrants from nonentrants. Paying particular attention to lines of business most accessible to adults lacking college credentials and substantial personal net worth, our analysis yields no evidence that financial capital constraints are a significant barrier to small-firm creation.

Suggested Citation

  • Bates, Timothy & Lofstrom, Magnus & Servon, Lisa, 2010. "Why Have Lending Programs Targeting Disadvantaged Small-Business Borrowers Achieved So Little Success in the United States?," IZA Discussion Papers 5212, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5212
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    Cited by:

    1. Craig Wesley Carpenter, 2016. "The Dynamics Of Latino-Owned Business With Comparisions To Other Ethnicities," Working Papers 16-33, Center for Economic Studies, U.S. Census Bureau.
    2. Stephan J. Goetz & Anil Rupasingha, 2014. "The Determinants of Self-Employment Growth," Economic Development Quarterly, , vol. 28(1), pages 42-60, February.
    3. Craig Wesley Carpenter, 2016. "The Impact Of Latino-Owned Business On Local Economic Performance," Working Papers 16-34, Center for Economic Studies, U.S. Census Bureau.

    More about this item

    Keywords

    self-employment; entrepreneurship; micro-lending;

    JEL classification:

    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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