Latino Americans Launch Small Businesses Faster than Others

Latino Americans are the fastest-growing group of entrepreneurs in the United States even as they battle racism that has resulted in lower incomes and loan rates, according to an article in USA Today based on statistics from Stanford University.

During the past decade, the number of Latino business owners grew 34%, compared with 1% for all business owners in the United States, according to the recent study from Stanford University. Moreover, a greater number of Latinos than ever are applying for small business loans to launch or grow their operations. 

An expert that I reached out to pointed out a few reasons for this optimistic trend. Dr. Arturo E. Osorio, professor of entrepreneurship, management and global business at the Rutgers University Business School, noted that “Latinos, as a culture, are more likely to have a need to ‘create’ something for their families and control their personal time. Thus, they are gravitating toward starting their own businesses to leave a legacy and be closer to their families.”

Osorio, a business consultant and advisor to the New Jersey Small Business Development Center (NJSBDC), believes this trend is linked to an increasing number of Latinos having higher education and learning more about the business world in the US. Additionally, Osorio said, the number of Latino business owners in the U.S. has been historically low, “so maybe they are just catching up.”

The growing success of Latino small business owners comes as Latinos are increasingly becoming an economic force to be reckoned with in the USA. The same Stanford study found Latino-owned businesses contributed about $500 billion to the economy in annual sales.

A 2019 report to Congress based on data from 2017 found almost 60 million Latinos in the country already account for $2.3 trillion in economic activity in total, which on its own would rank as the eighth-largest economy in the world. And Latinos are projected to make up 30% of the U.S. population by 2020, meaning the group’s contributions will probably grow.

Latino-owned businesses employ more than 3 million people, according to the 2019 State of Latino Entrepreneurship report by the Stanford Latino Entrepreneurship Initiative (SLEI), a Stanford University research initiative focusing on Latinos in business. Overall, Latino-owned businesses account for about 4% of U.S. business revenues and 5.5% of U.S. employment.

At the same time, it’s interesting that Latino-owned companies are smaller than white-owned firms, averaging $1.2 million in revenue compared with $2.3 million brought in by a white-owned company.

Latino business owners tend to be younger than non-Latino business owners. Roughly 33% of Latino entrepreneurs are younger than 45, compared with just 22% of non-Latino entrepreneurs. For every 100,000 Latino adults in the United States, on average 510 became entrepreneurs each month in 2018.

Osorio opined that younger Latinos “are more likely to notice career roadblock in the standard labor market.” He said the rates of Latino CEOs at the Fortune 500 have not changed much in the last 10-years.  And hinting at the racist attitudes alluded to in the study, Osorio pointed out that Latinos are noticing business opportunities that can provide them the professional progress that is not open to them.

“Entrepreneurship has become a mainstream inclusive career option. Current Federal and State policies are providing better support to everyone, regardless of their background, to start a business,” Osorio said.

With another nod to the important of local matters, according to the 2019 Stanford report, Latinos get loans from local banks at a much higher rate than they do from national banks. This underlines the vital relationship between local businesses and local financial institutions. In other words, it behooves neighborhood merchants, entrepreneurs, municipal administrations and residents to ensure that local financial institutions thrive and continue to provide their valuable service.

However, national statistics show the opposite. Local banks are disappearing across the country, potentially leaving Latinos out in the cold. According to data provided by the Federal Deposit Insurance Corporation (FDIC), as of December 31, 2001, 8,080 FDIC-insured community banks existed while by December 31, 2018, only 5,406 remained. 

Because of their neighborhood, local nature, small businesses, especially those on Main Street, help neighborhoods stay economically active and, in some cases, revitalize large and small cities experiencing decay and population declines. Small businesses help increase the local tax base and stimulate consumer spending in local economies. They also help local civic organizations, sports teams and houses of worship.

In New Jersey, Osorio elaborated, New Jersey’s Hispanic business community currently includes about 120,000 Latino-owned businesses, contributing $20 billion annually to the local economy. The largest chamber of commerce in New Jersey is the Statewide Hispanic Chamber of Commerce.

“Increases in the number of Hispanic businesses in the state may only help to move forward the local economy and create larger employment opportunities for everyone. Also, good communities are defined as those that have local access to everyday amenities, products, and services. Larger numbers of entrepreneurs and local innovation can only help to increase the quality of life across the state, and the nation as people gain better access to things that can make their lives easier and enjoyable,” Osorio said.

A not-for-profit organization for nearly three decades, the chamber convenes the Annual Convention and Business Expo, which I have attended and witnessed the electricity and enthusiasm of the exhibitors and attendees. I saw that Hispanic Americans are eager to launch their own thriving companies. The message of these events is that the Hispanic American community is vibrant and eager to grow its business.

“We have a large cross-section of businesses involved and the chamber serves as the catalyst to bring these businesses together to express their services and to collaborate and provide them with opportunities to grow their businesses,” John C. Leon, member of the board of the Statewide Hispanic Chamber of Commerce of New Jersey and government relations strategies chair, told me at one of the shows.

This latest conclusion goes hand-in-hand with a report released last year by the Trenton-based New Jersey Policy Perspective (NJPP) regarding national benefits of immigrant-owned businesses in general. Once in America, immigrants soon discover that contrary to rumors its streets aren’t paved with gold. Lacking English-language skills and comprehensive legal status, they were compelled to fend for themselves. As they struggled to build a better life for themselves and their families, the new settlers, as a consequence, made vast contributions to their adopted homeland.

More often than not, these immigrants open small businesses in order to make ends meet. And their successes and achievements multiplied. So much so that today small businesses that are owned by immigrants have become the cornerstone of New Jersey’s economy.

I had attended a press call about this report, at which Garden State officials and immigrant businessmen shared their experiences and observations about being entrepreneurs in a foreign country. (Read that full blog at https://boostingyouroutreach.blogspot.com/2019/03/immigrant-ownedsmall-businesses-ring-up.html

These are the key findings of the report: 

• Despite making up only 22% of the state’s population, immigrants own 47% of New Jersey's Main Street businesses 
• New Jersey immigrants own a higher share of the state’s Main Street businesses than anywhere else in the nation other than California
• New Jersey immigrants own 31% of the state's small businesses and makeup 28% of the state labor force.
• New Jersey immigrants own a majority of businesses in nine key industries (including restaurants, grocery stores, and trucking).

“This report is proof that New Jersey’s immigrants are an asset not only to our state’s rich and diverse culture, but also to the broader economy,” observed Erika Nava, NJPP policy analyst who prepared the report. “Immigrants in New Jersey own a higher share of Main Street businesses than in any other state not named California. These immigrant-owned businesses anchor local economies across the state, providing goods, services, and job opportunities in their respective communities. When immigrants come to this state, they do so not only to provide for their families, but to invest in New Jersey. Lawmakers should recognize the vital role that immigrants play in our economy and ensure state laws support them.”

It is obvious for anyone who has walked along any urban Main Street that immigrant-owned small businesses – Hispanic and not – are the lifeblood of our local economy here in New Jersey and the other 49 states. The archaic concept of the American melting pot has itself melted and been replaced by a luscious salad bowl of tastes, aromas and textures that contribute to the wholesomeness of the American multicultural banquet. Immigrant small businesses inject money into the local and national economies, help employ tens of thousands of people, and provide critical services to our communities.

Our state lawmakers must take into account the large contributions of immigrants as they author policies and laws that impact us all.

¡Buen trabajo!