Building a business as a Latino entrepreneur
Starting a business from scratch
In 2013, the company where Ramos worked, American Greetings, closed its L.A. office. It was a turning point for her as she considered her next steps.
“I thought, ‘Oh, my gosh. What am I going to do?’” she said. Ramos quickly realized that she could rely on her creativity, on which she’d capitalized since she was a young girl.
Ramos began challenging herself. “A friend asked me to illustrate a save-the-date postcard for her wedding, and I said, ‘Okay…’”
Soon after, Ramos’ designs were featured in a wedding magazine, and she opened her Etsy shop.
“It all started using my own money,” she says. “It’s all been out of my own pocket. I’ve never reached out for anyone to sponsor me or reached out to a bank for a loan.”
Ramos’ entrepreneurial spirit is common among the Latino population in the United States. Her Latino counterparts, who make up a full 18 percent of the U.S. population, reached a population of nearly 58 million in 2016, according to Pew Research Center.While the 2018 Stanford Graduate School of Business Latino Entrepreneurship Gap reported that just six percent of all businesses were owned by Latinos in 1996. Today, that number has more than doubled to nearly 13 percent.
The importance of Latino entrepreneurs
Though they face constraints, immigrant Latino entrepreneurs make important contributions to the economy, generating $36.5 billion annually in business income.
According to the U.S. Small Business Administration Office of Advocacy, roughly 1.2 million of the 12.2 million business owners in the United States are immigrant Latinos. In fact, the Harvard Business Review reported that immigrants from all over the world constitute 15 percent of the general U.S. workforce, but they account for around a quarter of U.S. entrepreneurs. Almost half of Hispanic-owned companies are owned by women, according to census data.
Eighty-six percent of immigrant-owned firms with at least $1 million in annual revenues are owned by millennials (under age 34) who came to the U.S. as children, according to “Insights” by Stanford Business. On a larger scale, Latino immigrants are twice as likely as the native-born population to start a small business, according to the United States Hispanic Chamber of Commerce.
Small Business Majority reports that DREAMers don’t shy away from entrepreneurship, either. Those protected under DACA work at small businesses and start their own small businesses in droves.
Financial challenges as a Latino entrepreneur
“I feel like I’m not making a lot, but I feel like I have to learn more marketing strategies,” Ramos says, noting that social media – Instagram in particular – has changed since she first started her business in 2013. “A lot of people don’t see you on Instagram unless you have 5,000 followers. It’s all about numbers. I’ve been giving out giveaways, and I haven’t been selling that much.”
There are a few concrete reasons why most Latino-owned businesses remain small, and Mary Vazquez, community advocate for Point West Credit Union in Portland, Oregon, has seen them all:
The solutions to many of these financial barriers start with accessible financial education.
“They need to find a personal coach that can assist them with any of their questions without them feeling like they’ll be rejected or a bother to those institutions,” Vazquez says of the Latinos in her Portland community. “We see those stories every day.”
In 2007, Vazquez was the only Spanish-speaking teller at Point West, but today, almost half the staff at Point West is bilingual and bicultural. She recalls a client, Sara Rodriguez, who felt comfortable with Vazquez because of her Spanish-speaking ability.
Vazquez suggested Rodriguez open a business using the credit union’s help. A stay-at-home mom of four, Rodriguez had no credit and no Social Security number. She did have an ITIN, so Point West issued Rodriguez a $500 loan to pay for permits and ingredients to start her tamale cart, Sara’s Tamales. Over time, Rodriguez received two additional micro-loans from Point West.
Funding your business as a Latino immigrant
Next year, Claudia Ramos plans to attend the #WeAllGrow Latina summit in Long Beach, California, to help her answer questions about what’s been elusive in the success of her business. “[The business owners at the conference] have the same goals: to grow and help each other. With what’s going on politically, it’s what we have to do to help each other,” Ramos says. “It’s part of our culture, too. To start my own little shop, I would feel more comfortable going to my family. Family is always there for you.”
She recalls a time when her cousin needed help funding a surgery, and she and her family members all chipped in to help. It’s the same with starting a business, Ramos explains. “You lean on family and friends before the bank.”
Vazquez, whose own family is from Mexico, agrees.
“Many times, I’ve seen personally and professionally how the Latino community is always asking friends and family questions about finances. If they have an idea for a business, they always ask a family member or a friend; they never really ask professionals,” she says. “They’re scared of being rejected, or they feel they don’t have the right to explore other options.”
She says that it can be a frightening prospect, particularly for those from another country, to dive into the complex process of obtaining funding.
Considering your funding options
While asking family and friends is often a more appealing option for Latino entrepreneurs, taking the risk of getting funding from a financial institution can help set up your business for success.
A list of pros and cons for various funding options are listed below. Note that regardless of legal status, Latinos can use the business name and number (EIN) to access business credit without having to disclose immigration status.
Loans specifically intended for a business purpose. Banks, credit unions, SBA loans and microloan programs can all be business loan options.
Pros: Business loans usually have lower interest rates, and using a business loan rather than a personal loan separates personal and business finances.
Cons: You must qualify for any type of business loan, and requirements vary. Most business loans require a high credit score.
You can set up an online campaign and raise money from a large number of people.
Pros: Crowdfunding is low risk, and you can tap into a larger audience via social media.
Cons: Marketing is imperative; you have to deliver what you’ve promised to backers and there is often a crowdfunding platform fee.
Individual financial backers who provide private capital for small or large businesses.
Pros: The money provided isn’t a loan; angel investors typically have lots of experience in your business of choice (they’re often established by entrepreneurs themselves).
Cons: Any equity you build will partially go to your angel investors; angel investors expect to make money and help make business decisions.
A person or firm that invests in small companies using money pooled from investment companies, large corporations and pension funds.
Pros: Venture capital can help your business grow quickly, offer business expertise and provide support with legal and tax matters, among other areas.
Cons: VCs expect to make money and often intend to make decisions about your business.
Money given to a person, business or corporation from federal, state, county or local governments, or private businesses or corporations.
Pros: Grants do not need to be repaid and they’re easy to find online.
Cons: Paperwork is time-consuming, there is tough competition, eligibility is strict and there are also specific rules you have to follow.
Friends and family are some examples of specialty lenders.
Pros: Friends and family trust you and care about your success.
Cons: You could lose money and jeopardize a valuable relationship. Always be sure to document the family member or friend’s role in the business.
Business credit cards can help entrepreneurs keep expenses separate while allowing them to pay off larger purchases over time.
Pros: It’s easier and more convenient to qualify for a credit card, rewards are offered and you can build credit. Credit cards also give you a financial cushion when accounts receivables are behind.
Cons: Credit cards are more expensive, have higher (and fluctuating) interest rates, personal legal liability, security issues and offer less protection compared to consumer credit cards.
Credit unions and business loans
One demographic-specific possibility is to access a Latino credit union like Point West Credit Union in Portland. A Latino credit union allows applicants to provide foreign identification, offers English and Spanish materials, financial education services and is able to focus on serving local Latino communities.
“You don’t have to have a Social Security number to bank or get a loan with us. That’s the promise we’ve made to our community,” says Vasquez. “Everyone who comes to our door receives the same service or rates. It’s based on your credit.”
Many Latino credit unions offer the same promise, and here’s a complete guide to Latino credit unions across the United States:
Latino and minority business grants
Latino and minority business grants are another way to fund a business, and a local Hispanic chamber of commerce is one place to start. For example, the Hispanic Chamber of Commerce of Metropolitan St. Louis showcases a list of grants on its website. Business owners can also research grants online using the following links:
A business credit card could be a great way to boost the buying power of a business. A credit card gives business owners access to a revolving line of credit to withdraw cash and make purchases – as long as it’s used wisely.
Some tips for using business credit cards include setting spending limits, watching for any strange transactions, and to be careful with large expenditures – and to remember that interest rates are often higher for credit cards than many other sources of funding, including business loans.
Dreams for the future
Ramos never stops thinking about her someday-shop. “That’s my dream and I’m going to keep working hard to get to that point. In my situation, I’m the breadwinner. I’m the only one who’s making money right now. I don’t have the luxury to concentrate on doing this full time.”
Vazquez says that despite fledgling business and entrepreneurial numbers across the U.S., Latinos have more opportunities than ever before. Latinos continue to push past financial or other restrictions: According to Biz2Credit, the number of credit applications from Latino-owned businesses rose 22 percent over the past 12 months.
Vazquez will tell anyone that the door to Point West is always open, and Vazquez herself can often be found greeting anyone who comes through the credit union’s entrance. “Even if you aren’t a citizen, you’re all welcome to come here,” she says.
Resources for Latinas:
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