Hispanic business owners own more than 20% of new businesses
1 in 4 new businesses in the United States belong to Hispanic business owners. This turns the Hispanic entrepreneurs in one of the largest generators of jobs in the country. In addition, their contribution to the economy is growing and it is estimated that they contribute more than $700 billion in sales each year.
The number of businesses with Hispanic owners increases
Generally speaking, the small business economy in the United States is positive. Those that belong to Latino owners are no exception and also enjoy a good time.
Between 2017 and 2012 the number of Latino businesses in the United States increased by 47%. According to a report from Stanford University, the participation of new Latino entrepreneurs reached 24% nationwide in 2016, while in 1996 it was only 10%.
The latest studies also indicate that Latino companies generate around 2.3 million jobs.
This means that Latino participation -and Hispanics in general- is increasingly important to the US economy. In addition, it is vital for the local communities where it is developed.
Some basic characteristics indicated by the different studies on Latino businesses are:
- Most businesses are smaller than those owned by white owners.
- Latinos are more likely to be microentrepreneurs or owners of firms that generate $100.000 or less per year.
- 51% of Latino entrepreneurs -among employer companies- were not born in the United States.
Despite the above, they report comparable growth to white-owned businesses in terms of revenue and payroll additions.
The Small Business Administration (SBA) also offers interesting facts about the Hispanic entrepreneurship in the United States. According to this organization, 91.3% of Hispanic companies had no hired employees (2016).
They also highlight that small businesses are the ones that produce the most jobs. The SBA claims that 2 million of the jobs they create come from businesses with fewer than 500 workers.
young entrepreneurs
About 60 million people make up the Hispanic population in the United States. With an average age of 29 years, according to the profile prepared by Pew Research (2017), less than the national average of 38 years.
When we focus on the case of entrepreneurs, we also see that entrepreneurs of Hispanic origin are younger than the rest of the entrepreneurs.
According to the SBA, 20% of Hispanic business owners are under the age of 35. When comparing this figure with the general average, we observe that only 14% are below that age.
On the other hand, reports indicate that the Latino population is more driven to start a business out of necessity than other demographic groups (whites and Asians). In other words, Latin Americans, like Afro-Americans, are usually unemployed at the time they decide to start a business.
Industries with the largest presence of Hispanic business owners
The SBA notes that the industries with the highest number of employees per company are employment services, warehousing, and business management. Meanwhile, wholesalers of groceries and other related products have the highest annual revenue among companies without employees; and the second highest among employers.
When comparing the distribution of Latino-owned companies with the rest, there are other interesting details. For example, that in the transport, storage and construction sector there is a high concentration of Latino-owned businesses. These represent 26% vs. 22% for non-Latino owned businesses.
Other industries in which Latinos outperform other owners are entertainment and hospitality; as well as in administration, waste management and other services.
Financial challenges of Hispanic entrepreneurs
Financing has always been one of the biggest obstacles for entrepreneurs of Hispanic origin. For those who were not born in the United States, the challenge is even stronger due to the lack of a credit history in the country or access to financial networks that help them grow.
But the financing problem extends to everyone, even those who were born in the US. Little access to credit and payment of operating expenses are the main challenges faced by this population. Among other inconveniences that they present is also the difficulty to pay debts and to purchase inventories and supplies.
So how do Latinos finance their businesses? Most get their resources from their personal savings, as well as loans from family and friends. Other sources include government agencies, venture capital, angel investors, and bank loans. However, it should be noted that Latinos have better relationships with local banks than with national ones.
Even in the face of these challenges, Hispanic business owners have an important place in the US economy. Latinos have shown that work is one of their most important values and they are willing to face any difficulty when starting a business.