Barriers to Loan Approvals. Information gaps can present formidable barriers to minority small business owners. They report encountering loan officers who do not clearly explain the information or credit criteria required to approve loan requests or do not thoroughly explain the reasons an application is declined. As a result, many minority small business owners cannot adequately develop businesses plans or loan proposals to obtain financing. Bankers can systematically provide information on the benefits and limits of various types of credit and deposit accounts they offer and on the terms and obligations of each.
Some lenders provide written materials in the predominant languages of communities they serve.
Institutions that provide more complete information on the documentation required to apply for a loan, for instance, and on the credit criteria they use, will likely increase the number of loan applications received from minority small businesses and decrease the time loan officers spend on incomplete applications. In addition, when a loan request is declined, some bankers routinely explain their reasoning and offer suggestions about how to improve the application to qualify for credit in the future. Banks with lenders of diverse language and ethnic backgrounds can achieve a competitive advantage in understanding the needs of local markets. These banks often staff their small business lending areas with loan officers from diverse backgrounds. As minority communities grow throughout the U.S., institutions employing appropriately skilled individuals that are from the cultural and language backgrounds of those borrowers may enhance their success in the minority small business market.