Keys to addressing Philadelphia’s high poverty rate: entrepreneurship, scaling small businesses
A panel discussion during the 2019 State of Hispanic Business event on Oct. 29 detailed the intersection between entrepreneurship and wealth.
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During the 2019 State of Hispanic Business event at the Federal Reserve Bank of Philadelphia, a panel discussion looked closely at how economic growth and prosperity can be bolstered through support of entrepreneurship.
Leaders from around the region took a deep dive into the trends and issues today that impact the economic growth of the Hispanic community.
With more than one-quarter of the population living below the poverty line, Philadelphia is the poorest large city in the nation. However, for Hispanics, the poverty rate rises to 38%.
The Federal Reserve Bank of Philadelphia, the host of the event, recently launched a new initiative that is dedicated to economic opportunity for all.
The initiative focuses on three key issues: infrastructure equity, workforce development and job creation. Each issue is examined to see what steps can be taken to reduce the gap that makes Philadelphia the poorest large city in the U.S.
Data gathered through the initiative indicated that small businesses are an important component of economic success and strong communities.
“They bring business back into communities, and they also create local employment opportunities,” said Ashley Putnam, director of the Economic Growth & Mobility Project at the Federal Reserve Bank of Philadelphia.
Hispanics outpace all other demographics in the U.S. when it comes to creating small businesses. Hispanic-owned firms currently total an estimated $700 billion of revenue annually, with more than 2.3 million people on payroll.
However, many of these firms face barriers that make it more difficult to scale, such as lower credit scores and limited credit histories. According to the Small Business Credit Survey, in 2017, Latino-owned businesses applied for financing at a 7% higher rate than their counterparts — 47% compared to 40%. However, Hispanic-owned firms are also more likely to experience funding shortfalls.
Nonetheless, the creation of small businesses are key.
“We see small business growth as part of a cycle of economic growth,” said Putman. “Small businesses create jobs, that creates employment opportunities, which builds wealth in communities.”
Earlier this year, the Greater Philadelphia Hispanic Chamber of Commerce launched a new initiative, called Accelerate Latinx. The program is aimed at building a more diverse and inclusive economy by supporting the growth of established Latinx-owned businesses, and is influenced by Interise’s award-winning curriculum, StreetWise’MBA.
Streetwise'MBA provides small business owners with the business knowledge, management, know-how, and networks needed to grow established small businesses.
Nancy Lee, Ph.D., director of research and evaluation at Interise, said that in the past year, Interise has looked deeper into the efforts that can go into how to change the system so that everyone benefits, and for future programs and tactics have better impact.
"Because of this partnership with the Chamber, and others, for Accelerate Latinx... we’re learning how to create executive education programming for Latinx businesses,” she said.
According to a report, Latinx and minority-owned businesses outperformed the average revenue growth, at 64% and 43%, respectively, compared to white-owned businesses, at 24%, in 2018. Lee highlighted that much of that is due to executive education.
The second focus of the program is procurement, which is another big factor in accelerating business growth.
“Procurement through business-to-business relations helps small businesses grow in a way that [business-to-consumer] doesn’t,” said Lee. “It’s an organic way for businesses to grow, it diversifies revenue stream… and on the buyer side, it’s a way to promote supplier diversity.”
Jennifer Rodríguez, president & CEO of the Greater Philadelphia Hispanic Chamber of Commerce, said that the focus in Philadelphia should be the need for Latino business owners to create flexible sources of capital that will help their businesses grow.
Though the number of Latino-owned businesses are aplenty, only about 3% of those businesses are making at least $1 million of revenue a year.
Rodriguez added that it's important to access capital from not only within the Latino community, but from outside of it, as well. Currently, it's a conversation that is happening on the national level; however, she noted that it's one that should be had at the local level also.
“If we are not building the pipeline of Latino-owned businesses, if we are not helping our Latino businesses grow… then the opportunities at the contracting level with institutions are just really going to be difficult,” she said.
“This is not an entrepreneurship problem, it’s a scaling problem.”