Latinos continue to open businesses in the U.S. despite lack of investment
Despite growth in population and number of businesses, the Latino community suffers from the stigma of underinvestment.
There are currently 4.4 million Latino businesses that contribute over $700 billion annually to the U.S. economy. Ryan Bethencourt is one of those Latinos who contribute to the sector. His father, a Cuban immigrant, invited him to join the family plumbing business, but Ryan had other plans: Today he is the CEO and co-founder of the vegan pet food startup, Wild Earth.
As Bloomberg explains, the Bethencourt startup won the endorsement of billionaire Mark Cuban on the Shark Tank reality show, raising $16 million. Bethencourt's company is one of the largest Latino-owned businesses contributing to the U.S. economy. However, Bethencourt's success in gaining access to capital is an exception; according to the Stanford Latino Entrepreneurship Initiative, there is already a significant opportunity gap for Latinos in the United States.
The fifth annual report of this association of Latino entrepreneurs notes the continuing disparities between Latino-owned companies and non-Latino-owned companies. Researchers project gaps affecting the U.S. economy totaling $410 billion in annual revenues, affecting 1 million jobs.
Since the onset of the financial crisis in 2009, growth in the number of Latino business owners has rapidly surpassed the national average, increasing by 34% compared to 1% of all U.S. business owners.
According to statistics in the same report, for every 100,000 adult Latinos in the United States, 510 started a new business in 2018. Not only does this involve entrepreneurship, but Latino businesses have been growing in size since 2012, when approximately 64,000 of them generated revenues of $1 million or more. Stanford's Latino Entrepreneurship Initiative estimates that the number has increased to 150,000.
However, access to external investment funds has not kept pace with Latino growth. Lenders are wary of the risks of lending to smaller companies and many Latinos lack the connections necessary to access investors.
For Latino companies, borrowing from banks or venture capitalists is less likely. When all else fails, they typically finance their businesses through credit card debt or factoring, the practice of selling at a discount. However, these practices carry personal risk that can impede the ability of these burgeoning businesses to prosper or survive, according to Bloomberg.