The Latino community is growing in the United States, not only in quantity but also in the quality of education, job opportunities and entrepreneurship. Overall, the study published by the Peterson Institute for International Economics (PIIE), The Economic Benefits of Latino Immigration states that Hispanics will contribute 0.21% to the annual real GDP growth rate over the next 25 years.
And the biggest impact comes from entrepreneurship, where more young latinos are making their own way to the american dream. Yet, this group still has to face obstacles like being segregated when trying to access business financing and race inclusion.
Latinos before and today
The typical stereotypes of an orange picking latino or the mexican gardener are in the past. Yet, there is a reason why this archetype of an immigrant exists. Even though immigration is not new for any country, it’s a fact that some immigrants used to have a lower education than the US citizens.
This became the main reason why hard or manual labor was a “natural” fit for the latino community. But the PIIE study shows that today, things have changed and most immigrants enter the country with a higher education level and, to help statistics, children of immigrants born and raised in the country have matched the level of academic training.
This last group, most of them known as dreamers, are fastly becoming the youngest and largest minority group in America. That means that they will also become a large chunk of the workforce -if it’s not happening already- among the 59.9 million latinos in the US.
This shows why it is expected that the Hispanic community in the United States will continue to help the US economic growth in the next 10 to 20 years, either as part of an educated workforce or, in accordance to the statistics, as business owners.
Small business financing and growth
Becoming a latino business owner is not impossible, in fact, it’s a trend that keeps booming. According to the study Latino Owned Business: Shining a Light on National Trends from Stanford Business School and Latino Entrepreneurship Initiative, in the last 10 years, Latino business owners grew 34%, compared to 1% for all business owners in the United States and employed over 3 million people.
Yet, most of them became business owners with non traditional small business financing. That is, not traditional for the entrepreneurial average, but a very typical way of financing among latino cultures: family and friends.
Why? The main reason is lack of information. Either not reaching out to financial institutions or a set idea that, by being immigrant or immigrant origins, they will not get a small business loan. That’s the mindset that lenders like Camino Financial are trying to change, and instead, empower latino business owners to access information, financing and guidance.
It’s normal for latinos to depend on personal savings and are likely to apply to other ways of financing their business such as credit cards, factoring, and merchant cash advances that are associated with less collateral but they regularly have higher interest rates.
Even so, this community has other small business financing options at their disposal like credits and loans. They just have to look in the right place. Latinos are leading industries over non latino business owners in:
- Non-manufacturing goods production & associated services
- Administrative support, waste management, and other services
- Leisure & hospitality
Also, 64% of latino-owned businesses are focused on a business to client (B2C) strategy and only 42% on a business to business (B2B).
Why Small business financing is important
Even though cultural attachment can weigh on a business decision, such as financing, the Stanford University study reflects that reliance on personal funds from family and friends can cause a deterioration of personal credit because that makes the business owner a ghost for financing institutions.
Also, this reliance will translate into an inhibition to scale, to grow a business that can expand because it will always rely on how much money a particular can invest or limit their cash flow. In order to overcome these limitations, any business owner should approach financial institutions that specialize in the latino community that can help them grow on their own.
If you belong to this group, find the financing options that can help you achieve your entrepreneurial goals. Not every door is closed and banks are not the only way to go