Financing preferences of ethnic minority owner/managers in the UK

Abstract

PurposeThe purpose of this research is to show that while mainstream finance for small businesses has been researched, hard to reach segments of the UK owner/manager population have eluded empirically rigorous investigation. The authors investigate the financing preferences of owner/managers in small ethnic minority businesses in the UK and examine their access to both formal and informal finance as well as the use of personal funding networks. The emergent results are compared with the findings from a matched “control sample” of white small business owner/managers.Design/methodology/approachIdentical, in‐depth, face‐to‐face interviews were used with a sample of ethnic minority small business owner/managers and a matched control sample of white respondents in the West Midlands region of the UK.FindingsFamily and close associate networks were very important for the support of both ethnic minority and white owner/managers. All the respondents required loans from banks and other financial institutions, both at the start‐up stage and in subsequent years. For the ethnic minority owner/managers, the initial importance of financial institutions declined over the years. In contrast, in the control sample, institutional borrowing needs increased considerably. Ethnic minority owner/managers showed a preference for less intrusive and more “user friendly” financing options that allow them to remain in full control of their businesses.Practical implicationsCaution is advised in the use and generalisation of results emerging from qualitative research that involves small samples of respondents chosen from a restricted area of the UK.Originality/valueThe research shows the importance of “user‐friendly” financing options for owner/managers.