Borrower discouragement: Explaining under-represented racial minority entrepreneurs’ relationship with debt financing

This study examines the factors influencing borrower discouragement among underrepresented racial minority entrepreneurs (URMs) in the United States, focusing on their engagement with debt financing. Despite their significant economic contributions, URMs face systemic challenges in accessing financial resources essential for growth. The research explores how experiences in racialised environments lead to feelings of stereotype threat, which in turn result in borrower discouragement. An experiment involving 186 entrepreneurs revealed that stereotype threat fosters a prevention focus while diminishing a promotion focus. Interestingly, stereotype reactance can mitigate the impact of stereotype threat on prevention focus. These findings enhance our understanding of the micro-processes in debt acquisition for URMs, contributing to URM entrepreneurship literature and resource acquisition research. They also have practical implications, highlighting the need for strategies to counteract borrower discouragement and support URMs in their entrepreneurial endeavours.