Are women and minorities seen as riskier when it comes to small business lending?

Banks seem to think so, according to a study released Tuesday by the Small Business Administration (SBA). According to the findings, even when controlling for factors like industry and credit score, African American, Hispanic and women business owners were less likely than white male business owners to have their loan applications approved.

The research also found these minority business owners rely more on their own money – and less on outside capital – than companies run by white male business owners.  And given these factors, firms run by African Americans, Hispanics and women end up operating on a much tighter budget. According to the findings, this is true both at the startup stage and several years down the line.

“Level of startup capital is a strong predictor of business success,” the SBA wrote, referencing two earlier studies on the topic.  

According to the SBA, Asians were looked at separately from African American and Hispanic business owners in the study, because their levels of wealth are similar to white business owners.

An earlier study mentioned found assets are the single most important factor in determining business creation, and explain why African Americans and Hispanics create businesses less often than whites in the U.S.

The Economy’s Role
It’s no secret on Main St. that the economy has played a major role in tightening purse strings when it comes to small business loans.

During the tough economic times of late, the SBA study showed banks made a “flight to quality,” which means they were more likely to invest in older firms and in companies operating in safer industries.

But, analysts warn, this move has serious implications for economic recovery.

High tech companies are typically seen as the riskiest to invest in – but they also are shown to promote the most economic growth through employment, assets and innovation. So avoiding high tech companies because of their risk factor can mean slower economic growth on a large scale.

When it comes to high tech firms, African American, Hispanic and female business owners tended to have much less startup experience than their white and male counterparts.

How to Look Better on Paper to Bankers
In general, small businesses aren’t particularly attractive to bank lenders, simply because of their size, says Doug Naidus, founder and CEO of World Business Lenders.

But that doesn’t mean there aren’t ways to improve your chances of getting funding. Naidus says small businesses make some pretty common mistakes that hurt their chances of securing loans – and they’re easy to fix.

“Especially in food services, many businesses don’t deposit cash into their bank accounts before paying vendors,” says Naidus. Making sure to put all cash into your account, which will allow you to show all company revenue to lenders, making your business more attractive.

“Small business lenders are focused on financial health and cash flow, so not depositing cash deprives them of proof of your cash flow,” he says.

This may seem obvious, but Naidus says paying bills on time is huge when it comes to determining a small company’s risk factor.

“Lenders will do alternate credit verification, where they verify credit by checking with a business’s regular vendors,” he says. So paying your vendors on time – all the time – is one easy way to better your chances of getting a loan.

Getting taxes in on time falls into the same category, says Naidus, and is also extremely important.

Lastly, make good with your landlord.

“Lenders use landlord verification, and the tone is as important as the substance,” Naidus says, adding that getting in good with your landlord, and making sure he’ll give you a positive review, can really make or break whether a small business secures a loan.

Follow Gabrielle Karol on Twitter @GabrielleKarol