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The Latino Entrepreneur: Is the American Dream Accessible for Everyone?

 

 

Latino-owned businesses (LOBs) are on the rise.

These entrepreneurs are starting small businesses faster than the rest of the startup community, but still face significant hurdles on the road to success.   

Constituting 18.1 percent of the nation’s total population, 58.9 million people of Hispanic origin make it the nation’s largest ethnic or racial minority.  

According to the Minority Business Development Agency (www.mbda.gov), roughly 600,000 of the 12.2 million business owners in the United States are U.S. born Latinos. Of that same 12.2 million business owners, 1.2 million are immigrant Latinos. However, business income for both Latino groups are substantially lower than non-Latino white business owners.  

 

Latino male business owners are highly concentrated in construction and Latina female business owners are concentrated in health care, social assistance, beauty, laundry and cleaning services. LOBs hire fewer employees and have lower average sales than white-owned entrepreneurs as this trend has been evident for the past couple of decades.  

LOBs tend to be younger than non-Latino entrepreneurs. Roughly 33 percent of Latino entrepreneurs are younger than 45, compared to just 22 percent of non-Latino entrepreneurs.  

Disparate levels of education negatively impact the Latino population, but the largest factor holding back LOBs is the lack of wealth and access to capital.  

The 2017 Small Business Credit Study by the Federal Reserve Banks reveals the challenges faced by LOBs. As many as 45 percent of Latino applicants were turned down for insufficient credit history and 37 percent for having too low a credit score. By comparison, white applicants were denied at rates of 33 percent and 26 percent, respectively.  

Even facing these challenges, Latino entrepreneurs make important contributions to the U.S. economy, generating $36.5 billion in business income per year.  

Latino entrepreneurial efforts are associated with the creation of new industries, innovation, job creation, gains in sector productivity, and economic growth. If minority businesses face liquidity pressures, discrimination and other barriers to creating new businesses or expanding current businesses, it inevitability leads to efficiency losses in the overall economy.  

A focused investment in minority firms provide returns that are comparable to mainstream investments. Funding minority businesses may provide attractive returns because the market is underserved.  

The path to funding can be complicated and perilous, considering the extra barriers faced by LOBs. Growing a business requires more than the “family and friends financing” approach. The importance of building a credit history to secure funding is not lost on these start up entrepreneurs, however this does create an impediment while perusing traditional funding at banks. LOBs need strategic financial partners with access to capital to bring their plans to fruition.   

With lower upfront costs, many have found acquiring necessary equipment through leasing to be a viable alternative that offers a quick path to revenue generation and cash flow management. A series of short-term leases will cost less than buying new technology and equipment every year. Equipment lease financing allows the lessee to acquire more and higher-end equipment, in most situations requiring low or minimal down payments. The option to structure leases to include installation, maintenance and other services, allow for faster implementation.  

More than 30 percent of all capital equipment in the United States is acquired through leasing. Eight out of 10 companies lease their equipment.  

Some LOBs would see their dreams languish had they not learned about financing options through Commercial Capital Company (CCC). Financial resources and flexible lease options provided by CCC help them build the revenue needed to grow beyond basic survival and thrive as a robust business. This kind of relationship is yet another resource for LOBs to rely upon.  

Closing the opportunity gap for Latino business owners will result in the formation of new businesses, a welcome growth in earnings, improved employment, a bigger tax base, and an increase in the nation’s GDP.

Call Commercial Capital Company today to get started, Toll-Free: 1-800-878-8053

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