Hispanics are entrepreneurial – as shown in the profiles on the following pages. But starting a business and growing one are different problems, and Hispanics face specific challenges with the latter.
Stanford University’s “2020 State of Latino Entrepreneurship” found that the number of Hispanic-owned business with at least one employee grew 14 percent between 2012 and 2017, a rate more than twice the 6 percent average for the U.S. overall. However, the same report found that “accessing capital has been an important barrier to growth” for Hispanic companies.
A 2018 report from the National Association of Latino Asset Builders concluded that “Latino business owners are denied credit more often, charged higher interest rates, or discouraged from applying for loans than white counterparts because they have lower credit scores, no or low collateral, and less startup capital.”
To bypass the barrier, Hispanic entrepreneurs often rely on personal savings, credit cards, family and friends for startup capital, according to the Stanford report. But financial headwinds continue after the startup period.
For example, when asked to name the worst aspect of owning a business, Carlos Camargo, owner of Ole Copiers in Glendale, responded; “Management of cash flow. It’s the thing that keeps me up at night.” Ole Copiers weathered the financial downturn of the pandemic through “PPP loans and everything that was offered,” he added.
For their part, Hispanic entrepreneurs are more involved in business networks than white business owners as a way to facilitate access to capital and other resources, according to the Stanford report. Camargo is involved in the L.A. Latino Chamber of Commerce. Adel Villalobos of Lief Labs in Santa Clarita, another entrepreneur profiled in this issue, said his Hispanic heritage has given him a “voice to try to maintain a balance with business leaders, the community and elected officials.”
On the lender side, facilitating deals with Hispanic entrepreneurs could open new markets while growing the economy.
“Mystery shopping studies in the business lending process have found that at the initial point of engagement, minority entrepreneurs are provided different information and shown different products,” the Stanford report stated. “Collectively, this research speaks to the opportunity for lending institutions to assess their practices at initial intake and their overall lending outcomes among small business owners.”