ACCESS TO CAPITAL: MILWAUKEE'S CONTINUING SMALL BUSINESS LENDING GAPS Gregory D. Squires and Sally O'Connor Small businesses constitute the backbone of the U.S. economy. The roughly 24 million small businesses nationwide employ 52 percent of the private workforce, contribute 51 percent of private sector output, create the majority of new jobs, and produce 55 percent of innovations. These businesses, and the U.S. economy generally, depend on access to credit, particularly from commercial banks, in order to survive and thrive (Of- rice of Advocacy, U.S. Small Business Administration 1999). Yet small businesses, and particularly small minority-owned businesses in urban communities, often experience difficulty in obtaining small busi- ness loans. Recent evidence indicates that minority-owned firms receive fewer and smaller loans than white-owned firms with identical traits (Cavalluzzo, Cavalluzzo, and Wolken 1999; Blanchflower, Levine, and Zimmerman 1998; Ando 1988; Bates 1989, 1997). Research conducted by the National Bureau of Economic Research found in a 1993 survey that black business owners were three times as likely as whites to be turned down for small business loans. Among firms that were compa- rable in terms of credit rating, age, size, geographic location, and experi- ence of owners, black-owned firms were twice as likely to be rejected and among those firms that were approved, black ownership paid an average of one percent more in interest (Blanchflower, Levine, and Zimmerman 1998). In addition to these national studies, similar findings This research was supported by the Helen Bader Foundation. We want to thank Donna Schenstrom, Head Cartographer of the Cartographic Services Laboratory at the University of Wisconsin-Milwaukee, for preparing the maps. We also wish to express our appreciation for data processing assistance provided by Frank Stetzer, Senior Consultant with Information and Media Technologies at the University of Wisconsin-Milwaukee.