Video perspective from Gallup
Dr. Frank Newport shares insights based on Gallup's report on lending to diverse segments.
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I’m Dr. Frank Newport, Gallup’s Editor in Chief.
Wells Fargo commissioned Gallup to take a look at these very specific, diverse segments of small business owners and, fortunately, we were able to do it by extracting small business owners from our very, very large study of Americans that we conduct on a daily basis — hundreds of thousands of interviews.
In those interviews, we ask Americans if they are small business owners or self-employed, so that’s where we get the initial sample. Then, also in the same surveys, we ask Americans about their race and ethnic identity, we ask them about their veteran status, of course we ask about gender, and we include a question which allows respondents to self-identify as LGBT.
This study was designed to get a better understanding of certain segments of small business owners in the United States. To understand how they got started, where their funding comes from, what their challenges are, how successful they deem themselves to be, what their relationship is to credit, and other questions along those same lines.
There were a couple of things that really came out of the data when we looked carefully at these diverse segments, based on ethnicity and race. On a lot of questions, the differences between our groups of Asians, Hispanics, or African Americans were very small when compared with the general population. So a lot of the concerns, the challenges, the successes, the credit and lending practices that these diverse segments encounter as small business owners are very similar to what we find in the general population.
One thing that surprised me was looking at credit. These diverse segments were somewhat more likely than general population of small business owners to say that they’d been declined credit in the past and were a little less confident in general of being able to get credit in the future. But, African Americans, in general, were somewhat less likely to rely on these traditional sources of funding, more likely to rely on things such as gifts and support from family and friends.
One finding that came through clearly in the data is that racially and ethnically diverse small business owners, African Americans, Asians, and Hispanics, are, in general, less likely to have used traditional sources of credit in the past when they started their business — or to be using them currently. One exception to that, of the three groups, is Asians, who seem to be much more comfortable, Asian small business owners, much more comfortable with using traditional sources of credit, like lines of credit or bank loans.
All of these groups are interested in credit in the future. Seventy percent plus of all of these segments are actually confident that they could get credit if they wanted it. But we have a little higher percentage of these segments who say they’ve been declined credit in the past, so the racially and ethnically diverse segments, I would say, all in all, have a little more distant relationship to traditional forms of credit than the general population, which, of course, means there’s a great opportunity there for credit for these individuals, their relationship with credit to improve going forward.
One of the high-level findings when we contrasted female small business owners with male small business owners were that there weren’t major differences. Women were generally more likely to be educated than males who were small business owners. But we also did find one difference, which is where women are less likely to have a relationship to credit — less likely to tell us that they’re going to apply for credit in the future. So, they’re a little more wary, I would say, of the credit system than male small business owners. But, taken as a whole, female small business owners in this country today really aren’t that distinct from male small business owners.
The LGBT segment, quite a bit younger than the overall average general population and, of course, that has significant implications, because their businesses are in the starting up phase rather than the middle or the declining phase; but in other ways they’re very similar to other groups that we looked at, including the general population. So we don’t find huge differences among small business owners who self-identify as LGBT in the others. We did find, however, that LGBT small business owners are significantly more likely to be interested in learning more about a variety of things that could affect, positively, their small business careers.
Well, demographics define veterans in this country today, and that’s true for small business owners who are veterans. They tend to be, in fact overwhelmingly tend to be males, and that’s because the vast majority of veterans in this country today are males. And also they tend to be quite a bit older. So what that means is that small business owners who are veterans are at a significantly different part of their career — they’re in the middle or in the declining phase of the career and, therefore, have different needs. The data do show that veterans are significantly more comfortable with credit, more likely to use credit, and feel like they can get credit than the overall general population.
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