There are over 62.5 million Latinos in America making up over 19% of the population. Even though the community is large and growing there is still a lack of support for their businesses.
Statistics show that there is a $1.5 trillion opportunity gap for Hispanic owners. These are natural factors of life that contribute to the lower rates of success.
With about five million Hispanic businesses in the U.S., many cannot scale their companies.
Here are a few reasons Latino businesses lack development.
Discrimination against Hispanics
Minority entrepreneurs are often treated differently than their white counterparts when seeking financial support for a small business. Most companies find it difficult to obtain business loans from banks or other ways of funding. Simply because when asking for loans of over $50,000 many face rejection.
Utah State University business professors conducted a study that showed Latinos have different experiences when seeking loans. The study had nine businessmen. Some white, Black, and Hispanic. The men had the same outfit and were similar in size. They were sent to banks asking for a $60,000 loan to expand the same business. When inside the banks, their experiences weren’t the same.
The Hispanic and Black owners were given less information about loan terms, offered less help, and asked more questions.
In another part of the study, researchers interviewed many small business owners of different races on their loan process. Most described it as a long journey. However, white owners described it as more simple. Even if approved for a loan, Black and brown owners pay 32% more in interest.
COVID-19
Although Hispanic entrepreneurs and communities were the fastest growing of any other demographic, The Latino community was struck hard and immediately by COVID-19.
Most Hispanic-owned companies consist of producing and selling fresh foods. Therefore, businesses are unlikely to be able to work remotely since most require direct contact with customers.
Because of this many have been terminated or negatively affected, especially in Black and brown communities. The pandemic caused unemployment to triple just for Hispanics in Illinois.
Many are uninsured or undocumented meaning they are more vulnerable to the virus. Across the country, 32% of Latino-owned businesses shut down due to COVID.
Even after the pandemic many still face financial problems in their businesses.
What is being done to help these businesses
Hispanic owners have a growing set of marketing tools that they use efficiently. This year revenue growth increased more for brown communities compared to white-owned businesses.
Many organizations like Google are providing funds for these small companies. Here are a few and how they have helped.
Google started the Latino Founders Fund that provides new business owners with $150 thousand to fuel their business. Recipients will also receive up to $100 thousand in hands on mentorship, Google Cloud credits, and access to mental health therapy for free.
The Latino Entrepreneurship Fund invests in Hispanic owners to advance their companies. Since 2020 this provided over $1.6 million in nonprofits working to create an inclusive economy for Latino Entrepreneurs.
The Latino Community Foundation distributed $1,000,000 in grants to 17 Latino organizations. Working with entrepreneurs across California, The state generated almost $120 billion in revenue.
Rayo Capital is a new Web3 platform that directs its focus on funding, accelerating, and providing long-term support. It invests in owners from all backgrounds and offers an accelerator program to guide and mentor participants.
Other investors have raised over $100 million for those companies in need.
This year has been fairly positive for Latino businesses. Over 23% of damaged businesses said they have recovered and are doing better than before.
By Jamarion Thomas
Sources:
NBC: Covid-19 took a toll on Latino businesses here’s what could be ahead in 2021
Washington Post: Black, Hispanic entrepreneurs discriminated against when seeking small business loans
WGNTV: What’s preventing Latino businesses from growing
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