The importance of small business to the success of Main Street America is an economic staple. One nuance to this story is the increasing diversity we can find on Main Street. As Geoscape reports, Hispanic owned businesses are expected to grow to more than 4.23 million this year. Not only are Hispanics the fastest-growing portion of the workforce, Hispanic businesses are growing 2.5 times faster than all U.S. businesses. With an increased focus on U.S. based job creation, Hispanic businesses represent a significant opportunity for the future growth and development of our overall U.S. economy. Here are a few things to keep in mind.
Family Fuels Entrepreneurial Drive
One main reason Hispanics cite for choosing to start a new business is family. The Stanford Latino Entrepreneurship Initiative found that a large number of Hispanic small business owners listed personal motivators like having something to pass down to children (26%) or being inspired by parents or family members as reasons for starting their business (16%). In fact, 92% of Hispanic owned businesses are family owned (in comparison to 85% of non-Hispanic owned small businesses.) Simply put, for Hispanics, “Family” and “Business” do mix.
Focus on Self-Reliance
Hispanic small business owners show a desire to keep their businesses close to their tight knit circles—68% of respondents said they started their business by themselves. This personal reliance also plays a role in financing too. Larger shares of Hispanics reported to have started their business with personal savings (69% vs. 62% non-Hispanic) and have had friends provide financial support (12.2% vs. 2.6% non-Hispanic).
Opportunity in External Capital and Financing
Hispanic small business revenue was projected at $668 billion in 2016, that’s a 29% jump from 2012. While this is huge growth, the aid of financial capital institutions can play a big role in further maximizing revenue for Hispanic small businesses. The Stanford Latino Entrepreneurship Initiative found that Hispanic-owned businesses were less likely to report that they had help from external financing: either from personal bank loans (10.7% vs. 13.4% non-Hispanic) or commercial bank loans (6.1% vs. 10.8% non-Hispanic). However, Hispanic business owners do recognize the benefit of outside help— 51% said they could have grown their businesses if they’d had additional capital. That $668 billion revenue has the potential to grow exponentially with more concerted efforts from commercial banking institutions targeting the Hispanic small business opportunity. As we approach Small Business Saturday, financial services institutions must take note: Hispanic-owned businesses represent a huge, untapped growth opportunity.
Sources: Geoscape – Hispanic Business and Entrepreneurs Drive Growth in the New Economy 4th Annual Report 2016. The State of Latino Entrepreneurship. Research Report 2015. Stanford Latino Entrepreneurship Initiative.