National Hispanic Heritage Month
Dear Readers,
Each year, we observe National Hispanic Heritage Month from September 15 to October 15, by celebrating the histories, cultures and contributions of American citizens whose ancestors came from Spain, Mexico, the Caribbean and Central and South America. So, as we kick off National Hispanic Heritage month, it seems fitting that this week’s question comes from a man that emigrated from Mexico who is considering starting his own business. He asks the question every entrepreneur asks himself or herself at some point, “What are the challenges particularly facing Hispanic entrepreneurs?”
Pedro: Latino immigrant entrepreneurs encounter some of the same barriers and challenges that everyone else does when establishing and operating a business. The biggest hurdle is insufficient startup capital. We know that traditionally the Hispanic community has had a harder time getting access to capital, which makes it extra challenging to start a new business. Almost 60% of Latino entrepreneurs said that having insufficient startup capital was a major barrier in starting their business and about 3/4 of these entrepreneurs used private savings to start their business while only 1/4 of them obtained some of their startup capital from bank loans. Unfortunately, national banks are minimally funding Latino-owned businesses relative to funding other types of businesses, such as venture capital, angel funding, or private equity financing, and to other demographic groups. We also know that the Small Business Administration is also under-serving Latino firms.
Josh: That’s disheartening to hear, especially since the Latino demographic is expected to make up a more than 25% of the U.S. population by 2050. We’d better start figuring how to enable Hispanic entrepreneurs, and get them the capital they need.
Pedro: Are you familiar with the State of Latino Entrepreneurship Report from the Stanford Graduate School of Business in collaboration with the Latino Business Action Network?
Josh: No, I’m not. What does this report say?
Pedro: Latino-owned firms make up only 12 percent of all U.S. firms, but Latinos represent 17.6 percent of the total U.S. population, so we have a bit of catching up to do, particularly before 2050, right? An important factor is the relatively lower levels of wealth, coupled with the funding barriers facing Latino entrepreneurs. In contrast, the Asian community has higher levels of wealth and is seeing greater success in entrepreneurial outcomes.
Josh: Interesting – and again unfortunate for the Latino community. In addition to early access to capital, do you see any other barriers Hispanic business owners running into?
Pedro: There are three other critical barriers that we see at the Hispanic EDC. Understanding regulations is a big challenge. Hispanics tend to lack of knowledge and understanding of the laws, taxes and regulations pertinent to starting their business. Finding an appropriate location or building in the right location and advertising are also identified as major barriers for Hispanic entrepreneurs.
Josh: This change must start at the local level, especially since 52% of Latino-owned businesses serve the local community.
Pedro: Being the catalyst for change right here in Kansas City is important indeed. What we also know though is that nearly half of U.S.-born Latinos are younger than age 18. A recent report found great promise among Latino millennials having the opportunity to scale their businesses. In fact, a recent Harvard poll finds that Latino and black millennials show twice as much interest as white millennials in starting their own businesses. As the younger Latino population comes of age, they can carry this entrepreneurial fervor forward.
Josh: And certainly it’s an amazing opportunity, as a bank and as a community to remove as many of these barriers to entrepreneurship as possible!
We’d love to hear from you. We are offering $100 to the reader whose question is selected next. Please submit your business questions to together@lead.bank.
