Latinx Startups and the Problem of Financing

While this may not seem to be the time to talk about new business, moments of crisis are also opportunities to evaluate what works or what doesn’t in a system.

With about 52 million people, Latinos in the United States have become an unstoppable force in the country, from their contributions to the workforce to their influence on the cultural fabric.

According to a report by the U.S. Small Business Administration Office of Advocacy, by 2018, about 600,000 of the 12.2 million business owners in the United States were U.S.-born Latinos. The office also found that “the two most important factors limiting business ownership among U.S.-born Latinos are their relatively young age and lack of wealth.”

However, this does not seem to stop our community when it comes to fighting for a better future.

Between 2009 and 2019, Latinx entrepreneurs “have been starting companies at a record clip,” as reported by Inc., showing a 34 percent increase in startups and being “the fastest growing startup demographic” in the country.

Often focusing on growth industries such as transportation, construction, and leisure and hospitality, this population has shown its strength in industries that are fundamental to the country, but it has not been rewarded in opportunities by the government.

Citing figures from the Stanford Latino Entrepreneurship Initiative (SLEI), Inc. explains that “Only 3 percent of these founders have reached the $1 million mark in annual sales.”

“Although Latinx entrepreneurs apply for loans at the same rates as their peers, only a quarter receive the full amount they’re asking for, compared with half of white business owners,” explains the magazine. “Maybe that’s the reason that some six in 10 Latinx entrepreneurs who wanted a loan didn’t apply.”

Another obstacle that Latinx entrepreneurs often face is precisely the lack of information about resources available to their companies. 

Inc. highlights strategies such as becoming a certified minority business owner to access government contracts or opening its scope to seek partnerships with large organizations and corporations.

“Not every company that scales succeeds. But those that do can then boost their growth rate. Conversely, being unable to borrow and scale creates an unvirtuous cycle. Latinx companies can’t scale for lack of funding, making them even less likely to get funding in the future,” the publication concludes.