In the decade preceding the COVID-19 pandemic, the number of Hispanic business owners increased 34% and today nearly one in four new businesses in the U.S. is Hispanic owned, according to the Joint Economic Committee Hispanic Entrepreneurship and Business Brief.
While this burgeoning segment of entrepreneurs brings valuable new products, services and perspectives to the marketplace, they also face significant hurdles, including less access to capital and even stereotyping regarding expected areas of expertise.
As we celebrate National Hispanic Heritage Month (September 15 – October 15), we also look at ways to expand support for Hispanic entrepreneurs and how to forge stronger connections between these small business owners and large companies seeking diverse suppliers.
Rapid growth but lagging revenue
While Latinos are founding businesses faster than the rest of the startup population, the businesses are smaller and make less money than their non-Latino counterparts, according to a survey of 1,800 Latino-owned businesses by Stanford University’s Graduate School of Business and Latino Entrepreneurship Initiative. To date, the researchers have compiled data on the size, revenues, financing and other characteristics of 1.3 million Latino-owned businesses.
Latino businesses are more likely to be family owned than non-Latino businesses and to be self-financed from personal savings, credit cards and friends. In comparison, non-Latino-owned businesses are more likely to secure commercial loans and bank loans.
The funding hurdle
Building on their own research, combined with data from the Federal Reserve Bank of New York and the U.S. Census Bureau, Stanford identified several obstacles to growth for Latino-owned businesses. They include:
- Lack of external funding available at acceptable terms.
- A reluctance to take on debt to support the business.
- A reliance on personal funds and family loans that can harm personal credit ratings and inhibit scaling.
- Greater use of high-interest credit cards as financing.
- Challenges in gaining access to credit to pay operating expenses.
- Receiving smaller amounts of funding when external funding is awarded.
Business owner Clara Richardson-Olguin has confronted many of these hurdles herself. An attorney practicing in the Dominican Republic, she moved to the U.S. to earn a degree in music management. She worked in the industry as an actress, model, songwriter, voice coach, manager and producer of high-profile events and concerts in Atlanta. At one of these events, she met her future husband and business partner, Cesar. Combining her husband’s background in the flooring industry and Richardson-Olguin’s business acumen, over the next 15 years they founded and grew a highly successful flooring business, while raising four kids.
“It was a very tough road at first,” she recalls. “We were immigrants and Latinos and no one would lend us money or even give me a credit card even though we had very good credit,” she says. Insurance companies wouldn’t work with them to provide benefits to their employees either.
Their first business lifeline came from Access to Capital for Entrepreneurs (ACE), a nonprofit Community Development Financial Institution (CDFI) that provides coaching and connections to investment to help underrepresented founders. “They invested $20,000 in us and that helped us grow our business that next year to $150,000 in revenue and then to $500,000 in revenue after that,” Richardson-Olguin explains. CIC Floors hit the $1 million mark in revenue in 2019 and $1.6 million in 2021. They’ve grown from their first 2,000 square-foot-store to their current location with nearly 6,000 square feet in a highly desirable area.
Another place that Richardson-Olguin has found support is among fellow minority entrepreneurs and with the Monica Motivates, LLC community. She is among a select 75 founders who participated in the Fifth Annual Global Supplier Diversity Conference (GSDC) in person September 22, 2022 at the Porsche North America Headquarters in Atlanta.
While more than 95% of U.S. corporations have a supplier diversity goal, they often struggle to connect with diverse suppliers. During the GSDC, senior executives from leading companies and highly successful entrepreneurs will share their expertise about how to create mutually beneficial relationships.
“As Latino business owners, we are highly motivated to prove to ourselves, our families and the world that we have the talent, work ethic and drive to be very successful,” Richardson-Olguin says. “National Hispanic Heritage Month provides a little extra opportunity for us to celebrate our roots, engage our local communities, and demonstrate to large corporations that we are ready and able to partner with them to meet their needs.”
Lend your support
A few ways you can help celebrate National Hispanic Heritage Month include:
- Whether shopping local or online, seek out Hispanic-owned businesses.
- If you love the service or products from a Hispanic small business, share the news in online reviews.
- When attending conferences or business association meetings, speak up if you don’t see any Latinx presenters featured.
- Follow hashtags that Hispanic small businesses use to connect with more followers.
- Diversify your vendor supply chain.
Monica McCoy, Global Speaker & Business Strategist
Practice Works member and Owner of Monica Motivates, LLC