- MBDA Report on Hispanic-Owned Businesses
According to the Minority Business Development Agency the number of Hispanic-owned businesses increased nearly 44 percent to 2.3 million between 2002 and 2007, more than twice the national average of all U.S. businesses. The total number of U.S. businesses during the same period increased 18 percent to 27.1 million.
Small businesses make a unique and creative contribution to the American economy. For most Americans seeking economic independence, small business ownership offers the greatest opportunity. Small businesses produce a major share of business innovation. Their numbers make them the largest source of private employment and the most tangible local representation of the private enterprise system in America today. One barrier to entry into small business ownership is access to capital, especially long-term debt financing.
Despite this growth access to capital has been unequal. A significant number of Hispanics, particularly recent immigrants, fear financial institutions due to their experience with corrupt institutions in their home country. This is not surprising given the economic and political situations that have existed in many Latin American countries including rampant inflation, constant currency devaluations and periodic economic chaos. Further, many Hispanics do not feel that U.S. banks want their value as customers. This mentality is based on the perceived lack of Hispanic outreach as well as the high rejection rate on loan applications, which is two times higher than non-Hispanic white applications. Recent initiatives to improve access to capital and credit have continued to reflect concerns about the distribution of credit flows and fairness of access for different economic sectors, one of them, the Hispanic.
Access to capital has been the greatest barrier to entry into the entrepreneurship facing women and minorities, and this concern is not going away. Disadvantaged groups find it harder to come up with a social network that will help them finance major ventures. Hispanic Business owners face some difficulties obtaining capital access, therefore this is a sensitive matter for them because some times they can not have this access in an efficiently way due to a lack of credit history, bad credit records and other some issues. These situations stop the Hispanic Business owner from achieving their goals.
There are limited options available for Hispanic-owned Business to get the startup capital they need for their new business. These small businesses should not get discouraged when they are looking for business capital, as there are numerous avenues to explore. In order to obtain a business loan, they will need a well-drafted business plan, accurate cash flow projections, your financial history and your personal and business credit profiles. Like any start-up, Hispanic-owned businesses have these financing options: Personal funds, angel investors, credit cards and loans from relatives and friends. However, access to capital via traditional lending institutions often not readily accessible.
We are pleased to read the announcement made by the SBA today that a three-year pilot program will be started to lend up to $200,000 to small businesses, which will direct loans to eligible non-profit intermediaries for the purpose of making small business loans of up to $200,000. SBA is seeking experienced intermediaries to assist small business concerns in areas suffering from a lack of credit due to poor economic conditions or changes in the financial market. SBA’s Intermediary Lending Pilot (ILP) Program aims to help business owners start and grow successful enterprises.
Read more at http://www.sba.gov/content/intermediary-lending-pilot
Post by Reina Valenzuela, MBA, CEO of Starfish*Global, a management consulting firm catering to small minority-owned businesses