A recent report published by The Concilio, a Dallas-based nonprofit that advocates for Latinos, confirmed the economic potential of our country’s Hispanic population, but it showed some worrying statistics. While Hispanic businesses are created in large numbers, they do not grow consistently.
Most troubling, 29% of small businesses in Texas were owned by Hispanics in 2018, but only 7.6% of businesses in Dallas were owned by this demographic, according to the State of Latinos report by The Concilio. The percentage of Hispanic-owned businesses in Dallas grew by less than 0.2% between 2014 and 2018. Analysts don’t know how to explain those numbers.
Still, the Hispanic potential is amazing: Between 2012 and 2018, the number of Hispanic businesses in the U.S. increased by 40% compared with 18% of all American businesses.
And while businesses overall decreased in the years after the Great Recession, Latino-owned businesses increased by 47% between 2007 and 2012.
The Concilio president Florencia Velasco said Latino small businesses became the backbone of the U.S. economic recovery. “This is a narrative we don’t really hear and was very important,” she told us. “Without that growth, our unemployment rate and recession would’ve been harsher.”
This economic drive, however, is not sustained in the long term. According to the report, the average white-owned business achieves the $1 million revenue threshold within five years. For a Hispanic business, this milestone takes an additional five or six years.
Officials with The Concilio say further research is needed to assess why this growth is lagging, and they expect to issue an updated report next year. However, there is some evidence that poor access to credit is one of the reasons limiting growth among Hispanic businesses.
The pandemic provided insight into some disparities with the Payment Protection Program loans, for example. Several studies showed that majority-white areas got more PPP loans than Latino or Black neighborhoods, widening existing economic gaps.
And in Dallas, very few Latino-owned businesses benefited from the Small Business Continuity Fund, a local program administering federal dollars, during the height of the COVID-19 crisis. Of 340 Latino businesses that applied for the fund, only 76 received the loans, as reported by our sister publication Al Día in 2021.
Focus groups led by The Concilio in Dallas revealed that loan application remains an intimidating process for many people, especially those with small businesses run by families with limited English proficiency.
The reality is that Latino business owners often rely on their personal savings to start a business, and financing is frequently not available on acceptable terms. Banks are missing out on this potential by not doing enough outreach to inform would-be or existing entrepreneurs about available programs and by failing to be proactive about reducing obstacles such as the language barrier.
A study by McKinsey & Company, a management consulting firm, argued that addressing these barriers can further unleash the Latino entrepreneurial spirit and create millions of jobs. An important conclusion of this study: Latinos start more businesses per capita than any other racial or ethnic group. Our cities must take advantage of this economic engine.
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