This paper provides evidence on ethnic differences in bank debt financing among small Swedish firms at the start-up stage. The empirical analysis is carried out on a sample of small firms consisting of 2,814 native- and immigrant-owned firms for year 2008. The method of binary logistic regression analysis was mainly performed to analyse the data. The empirical results suggest that immigrant-owned firms tend to use less bank debt than their native counterparts. Moreover, the variables related to human capital, previous experience of starting a business, university education and an additional job beside the business have a positive impact on the use of bank debt. There is also a positive influence of personal start capital and the size of firm in terms of number of employees on access to debt capital. However, firm characteristics, legal form and industry affiliation affect the debt funding negatively, indicating that firms with less formalised legal status operating in less developed market segments and with less physical capital are less likely to have access to debt capital.
Keywords: bank debt, ethnicity, small business finance, credit constraints