Bloomberg Línea — Latino-owned businesses in the United States face challenges such as lack of financing or less access to government contracts, as opposed to white-owned companies, but, despite these hurdles, Latino businesses boast the highest growth rates in terms of jobs added, and are recovering the fastest from the Covid-19 pandemic, according to two recent surveys.
That’s according to the annual State of Latino Entrepreneurship (SOLE) report conducted by Stanford Graduate School of Business (GSB) and the Latino Business Action Network (LBAN), which surveys businesses that employ at least one Latino in addition to their owner, as well as incorporating employer firms that generate at least $10,000 in annual revenue.
Economic activity generated by Latinos in the US today no longer goes unnoticed, given that that segment of the population represents 19% of the total (more than 62.5 million) and generates $2.8 trillion. In addition, Lainos own fve million businesses in the US that generate more than $800 billion in annual revenues.
Despite this, Latino-owned companies face difficulties due to a certain relegation on the part of financial and governmental entities.
According to the research, Latino-owned businesses receive smaller government and corporate contracts and which take longer to obtain, compared to companies owned by white citizens.
Latino companies procure corporate contracts that are 3.3 times smaller, on average, than their white peers. The same goes for state and federal government contracts, but which are 30 times smaller.
In terms of duration, Latino businesses are awarded contracts that last an average of up to six months, while those owned by whites are awarded contracts lasting more than a year on average.
Another major stumbling block is access to financing.
“Latino-owned firms have stronger performance metrics than white-owned firms; however, they receive a smaller proportion of funds requested in loans above $50,000″, the Stanford study cites. However, white-owned firms get substantially higher approval rates for the same loan.
Growth against the odds
However, “Latino-owned businesses continue to outpace the growth and revenues of white-owned businesses and US businesses overall,” the report highlights.
Between 2007 and 2019, the number of Latino-owned businesses grew by 34%, while the number of white-owned businesses declined by 7%. Also, Latino-owned businesses’ revenues and payrolls during the same period grew faster than those of white owners.
During the pandemic (2019-2022), the average revenue growth rate for Latino firms was 25%, while for non-Latino companies it was 9%, while average annual growth was 7% for the former and 3% for the latter.
The post-pandemic recovery is also important to note among Latino-owned companies, as they are recovering faster as they are expanding their customer base.
However, no company escapes the so-called ‘great resignation’, which peaked during the summer of 2022 when some 4.5 million Americans left or changed jobs as a result of the post-pandemic paradigm shift in the world of work.
“Our analysis reveals that the ‘great resignation’ affected Latino-owned businesses more than white-owned businesses, as the former face more challenges in retaining and recruiting employees than their counterparts,” the research concludes.