Small businesses have always been the engine of economic growth in the United States. The rise in minority-owned ventures has been a positive upward trend in recent years. And what’s really fueling growth and employment is a steadily upward trajectory in Latino-owned small businesses.
The U.S. Hispanic Chamber of Commerce estimates that Latino entrepreneurs generate $700 billion in annual economic value per year. Even more significant is the trends showing that Latino businesses have grown by 34 percent in the last 10 years. By comparison, non-Latino ventures have only grown by 1 percent in that same timeframe.
What accounts for the dramatic difference between Hispanic entrepreneurship and the rest of society at large?
One explanation is an increase in Latinos who go to college. The college experience not only provides knowledge, but the degree enhances credibility when seeking startup capital.
This possible explanation is backed up by the fact that Latino entrepreneurs tend to be younger than their counterparts. Studies show that a third of Latinos are younger than 45 years old, compared to 22 percent for everyone else.
There has also been an influx of immigration from places like Puerto Rico and Honduras in recent years, driven by natural disasters, gang violence and other socio-political factors. Solidarity has always been a component of economic growth in ethnic communities. Furthermore, new Hispanic arrivals see others succeeding in business, which may drive their own aspirations.
The recent success of Latino-owned small businesses doesn’t mean there aren’t challenges.
Critics of the banking industry argue that racial minorities find it more difficult to get access to credit and business loans. In addition, homeownership is a key lynchpin to entrepreneurship for 2 important reasons.
The first reason is philosophical. Owning a home gives one a stake in the community and makes it more likely that a person would build a business to serve that community.
The second reason is financial. When you own a home, you have equity. When you have equity, you have an asset that can be used to leverage your business idea.
But there is far more good news than bad news when it comes to Hispanic entrepreneurship. Latino-owned businesses are not only succeeding, but they are also planning for more. Prior to the coronavirus pandemic, a striking 87 percent of Latino business owners were planning to expand their ventures in the coming year. By comparison, only two-thirds of non-Latino businesses had such hopeful plans.
Of course, these numbers were generated prior to the COVID-19 outbreak. We don’t yet know how the subsequent quarantine will impact the growth and expansion rates.
But the trends cited here point us to something important:
The future rebuild of the U.S. economy that will start whenever the post-virus era begins is going to depend heavily on the work of Hispanic entrepreneurs.
The communities that were producing growth and optimism before are going to be relied on even more in the future.