Bi-Polar: College Education and Loans to Small Businesses Headed by Black Females

This paper uses the 1998 and 2003 Surveys of Small Business Finance (SSBF) to detail the recent experiences of black female headed small businesses (BFHBs) in the capital markets. It documents, a large disparity in the importance of a college education for black and non-black female headed businesses (NFHBs); that the race of a female headed business is an important factor in determining whether a loan is approved; and that although receiving a college education does not remove the cost BFHBs face due to their owner’s race, it is significantly lower than that faced by their peers without a college educated owner. Together, this paper provides striking evidence of taste-based and statistical discrimination , both in violation of the Equal Credit Opportunity Act.