For the first time in over 20 years, a groundbreaking study has explored the disparities in interest rates based on the race, ethnicity, and gender of business owners. Conducted by the Consulting and Business Development Center at the University of Washington’s Foster School of Business, this research uncovers systemic biases that result in higher borrowing costs for businesses owned by people of color and women (Bradford & Verchot, 2025).
The findings of the study are staggering: Businesses owned by people of color pay an estimated $8 billion a year in excess interest, solely due to the race or ethnicity of the owner. This excess cost is not reflective of differences in credit risk but instead points to entrenched biases that undermine the financial stability and growth potential of these businesses (Bradford & Verchot, 2025).
The study breaks down the specific penalties faced by different groups:
- Black-owned businesses: These businesses are charged, on average, 3.09 percentage points higher interest rates than white-owned businesses (Bradford & Verchot, 2025).
- Hispanic-owned businesses: Business owners in this category face an additional 2.91 percentage points in interest costs (Bradford & Verchot, 2025).
- Asian-owned businesses: These entrepreneurs are subject to a 2.88-point penalty (Bradford & Verchot, 2025).
- Women-owned businesses: Women entrepreneurs are also significantly affected, with average interest rates 2.38 percentage points higher than those charged to male business owners (Bradford & Verchot, 2025).
These disparities are not rooted in any inherent differences in business performance or creditworthiness, but rather in discriminatory practices that persist in lending markets. These practices can stifle the growth potential of businesses owned by people of color and women, hindering their ability to access capital at competitive rates (Bradford & Verchot, 2025).
Addressing these interest rate disparities can be essential to fostering a powerful economy. The findings of this study serve as a call to action for lenders, policymakers, and business leaders to become aware of and address the systemic biases that persist in the lending process.
To read the complete study, please click here.
References
Bradford, W. D., & Verchot, M. (2025). The racial and gender disparities in interest rates for business owners: A study of systemic bias in lending practices. Consulting and Business Development Center, Foster School of Business, University of Washington.