People often wonder why Latino businesses don’t do as well as businesses owned by other nationalities. One reason for this, according to the Online Hispanic Chamber of Commerce, is a lack of financing for these businesses. In fact, Latino business owners report a lack of access to capital and the cost of capital are the driving reasons behind their failure to thrive in many industries. They are less likely to apply for capital as a result and their business suffers. This is true even when they need funds. Why is this the case?
How This Affects Latino Businesses
Latino entrepreneurs state they are unwilling to request financing as they feel they will be rejected. In fact, the 2017 State of Latino Entrepreneurship report found that 54 percent of Latino entrepreneurs failed to request financing as they believed their application would be denied. They didn’t even try to obtain the needed funds to start or expand a business. No person should be discriminated against based simply on their race, but Latinos believe this is still an issue in the country which needs to change if more people are to be encouraged to start a new venture.
Profits are likewise negatively impacted when there is a lack of capital. Fifteen percent of businesses owned by Latinos report the lack of capital is an issue within their organization, while only 11 percent of non-Latino entrepreneurs express the same concern. When non-minority-owned businesses are questioned about this issue, the figure decreases to ten percent. This doesn’t take into account the lack of access to capital which differs from an actual lack of capital. Here, 16 percent of Latino entrepreneurs state this is a problem while only ten percent of non-Latino owned businesses feel this is a concern.
Lenders need to find ways to attract Latino entrepreneurs. Some states do a better job of supplying funds for individuals falling into this category, but this is not the case everywhere. Until changes are made and Latinos feel they are welcomed by all lenders, the level of entrepreneurship in this racial group will not improve. Fortunately, organizations are now highlighting this issue and hopefully changes will be made in the future so every Latino who wants to own a business can do so with ease.