By : Baltazar Acevedo y Arispe, Jr., Ph.D.
The Borderlands Group, Waco, TX
This brief narrative will provide an overview of the status of Hispanics as entrepreneurs on a national scale. The major source is from a national research survey that was conducted at Stanford University in Palo Alto, California in 2017. In future narratives, data from the University of Texas at Austin and from the Office of the Texas State Comptroller will be analyzed to provide a state wide and regional overview of Hispanic Entrepreneurship in Texas.
This national overview should serve as a means to guide regional and Waco based initiatives to expand the participation of its Hispanic business community. Stanford University’s report, The State of Latino Entrepreneurship, provides these findings:
- Latino-owned firms compose a significant—and still growing—percentage of U.S. businesses.
- While the rising U.S. Latino population has an influence on the number of Latino firms being created,as a demographic segment, Latinos have the highest rate of new entrepreneurs.
- In 2015, the gross domestic product (GDP) produced by all Latinos in the United States was $2.13 trillion.
- National banks provide less loan funding to Latino-owned businesses, relative to other external funding sources and other demographic groups.
- National banks provide less loan funding to surveyed Latino-owned businesses relative to other external funding sources such as venture capital, angel investment, and private equity, and relative to other demographic groups. In fact, the low rate of national bank funding is second only to that of the Small Business Administration, which is the lowest funding source for Latino firms.
- Considering only Latino-employer firms, Latino-owned businesses have the lowest rate of business loans from financial institutions among all other firms. Only 12 percent of Latino businesses access bank loans, compared to 18.4 percent for white-, 15.3 percent for Asian, and 14.2 percent for black-owned firms. National bank loans are used less often than all other funding except SBA loans. Latino firms currently have the lowest number of government-backed loans, although nine times that number say they would like to have them.
Latina-owned companies are increasing in number at a rapid rate; however, Latina entrepreneurs face a funding ceiling.
Latinas play a prominent role in Latino-owned business growth trends, having increased by 87 percent between 2007 and 2012. Latina-owned businesses represent nearly half of all Latino firms. In contrast, non-minority women-owned firms represent a smaller share of all non-minority-owned firms (just over one-third). However, access to capital, a major facilitator of business growth, presents a challenge for Latina business owners, many of whom perceive themselves as “not qualified” to receive funding from financial institutions compared to men, even when holding firm size constant.
Successful Latino immigrant entrepreneurs are more likely to be millennials who came as children to the United States.
Millennial (ages 18-34) immigrants who came to the United States as children are overrepresented amongst immigrant owners of businesses earning $1 million or more annually. Specifically, 86 percent of scaled ($1M+) immigrant-owned firms are owned by millennials who immigrated as children. By spending their formative school years in the United States and with expanded access to higher education, they develop English language skills more quickly than older immigrants and have opportunities to acquire various forms of capital (i.e., social, cultural, and financial). At the same time, they are motivated by “immigrant optimism,” and through psychological acculturation, this group excels as entrepreneurs.
Latino-owned businesses are international in reach.
Among all employer firms, Latino firms have the highest rate of business clients and customers outside the United States (4.5 percent vs. 4 percent for Asian-, 2 percent for white-, and 1.9 percent for black-owned firms).7 Among all Latino firms surveyed, 9 percent have international clients and 28 percent have clients throughout the United States, demonstrating a propensity to be global-minded.
Latinos as Consumers on a National Scale.
Consumer-focused reports often emphasize the significant purchasing power that Latinos represent. However, Latinos are more than just consumers as they produce immense value as employees and as employers throughout their entrepreneurial careers.
According to the Latino Donor Collaborative, if Latinos in the U.S. were an independent country, the Latino gross domestic product would be the seventh largest in the world. In 2015, the GDP produced by Latinos in the United States was $2.13 trillion, larger than the GDPs of India, Italy, or Canada. This represents a massive opportunity to expand the United States economy. One pathway forward is through the opportunity gap found between Latino-owned and other businesses. If the opportunity gap (the difference between the average annual revenues of Latino vs. non-Latino owned firms) were closed, we could expect to see more than $1.47 trillion added to the Latino GDP.
The Stanford reports focuses on a trend that should not be ignored and that is the continuing upward trajectory of the Hispanic population. The Latino population continues to steadily grow, representing 17.6 percent of the total U.S. population today and accounting for more than half of total U.S. population growth in recent years. Furthermore, Latinos make up the youngest major racial or ethnic group in the United States, of which one in three (17.9 million) are under the age of 18, and about 25 percent (14.6 million) are millennial age. Population size plus youth make the trends highlighted in this report all the more defining.
The challenge to Waco’s Hispanic leadership is to find the means to conduct more regional research to guide policies, training programs and practices that expand the sustainability of its emerging, expanding and diverse entrepreneurship base.