Latinos are a fast-growing, young section of the US population and they are very entrepreneurial, but Latino businesses are often struggling to find the funding they need to grow and succeed.

These businesses are “one of the most neglected opportunities for investors,” the Boston-based Bay and Company said in a report released earlier this month.

According to the report, between 2007 and 2017, 50% of new businesses in the United States were started by Latinos. And most of these businesses outnumber their white-owned friends until they reach US $ 1 million.

This is because many of them cover their growth by incurring high debt or mortgages, “said Hernan Saynz, co-founder of Bay and co-founder. Author of the report.

Young businesses are better off investing their first growth in banking or community development financial institutions with low-cost loans or, better yet, angelic investors or venture capitalists. Fairness does not need to be repaid in the form of debt, which means that money raised in a business can be used to further its growth, says Sens.

Young Latino-owned businesses often face financial difficulties, lack of interest from their owners – they may not know where and how to ask for the money – and lack of supply.

The missed opportunity is great. “If the population of Latin-owned businesses grows at the same rate as white-owned businesses, today, by 2021, it will add $ 1.4 trillion to the U.S. economy,” Saenz said.

Penta He recently spoke to Sanz about Latino-owned businesses representing investment opportunities and how to address supply and demand issues.

Lack of funding

Although the report does not fully explain why Latino-owned businesses are not involved in financing local banks, the survey found that some business owners “may find it difficult to navigate existing structures and processes.”

As a result, Latin American businesses with less than US $ 1 million in revenue are 19% less likely to receive full financial support from a domestic bank, according to the report. As a result, they move into more expensive forms of finance, often higher rates and harder contracts.

Even Latino-owned businesses exceeded $ 1 million, Bain found that whites were three times less likely to seek funding from angelic investors. Their recurrence may be because they do not know how to seek this support or because they do not “think about getting paid,” says Saenz.

Even foreign-invested investors are cautious, and the lack of foreign funding is even more pronounced as these companies grow. According to Bain, when it comes to personal equity, these Latino-owned businesses should have twice as many investors as their non-Latino counterparts.

Over the past 10 years, only 1% of investments made by high-25 venture capital and private equity firms have been privately owned, according to the report.

Creating a marketplace

For Sanz, one solution is to create more “markets” where businesses and investors can interact with each other. An example of this is L’Attitude, the annual meeting of the Latino Chamber of Commerce, which includes a peach session in which “capital and balance-ready” businesses present their stories to investors. Then L’attitude Ventures, Venture Capital Fund, selects a few of these promising businesses each year for financing, says Sancez.

Stanford Latino Entrepreneurship Initiative, affiliated with the Stanford University School of Business, has trained business owners on how to raise money and grow their companies. And facilitates connecting investors with potential investors.

These events represent the “solution of the problem,” Saenz says. “That’s what we have to do in moderation.”

There are some lenders outside the market, including banks such as Wales Fargo.


Bank of America

And Listo !, are offering a small business loan. There are also Latin-owned, non-profit CDFI-owned and social-influenced Latin American organizations in San Antonio, Texas.

Latino-based venture capital and private equity firms, such as Palladium Equity Partners in New York and Palo Alto, California, have invested up to 97% of total Latin-owned businesses. .

But these funds are the potential drop in the bucket.

By examining some of the largest businesses in the world, Bain, who has a net worth of more than US $ 5 million, “has proven to be surprisingly good in terms of white-owned businesses,” says Sanz.

“The problem is that we are not getting enough to measure.”

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