2.3 Million Latino Business Owners Contribute To The Economy

By Susana Baumann

Hispanic business owners play an important role in their communities that need not to be underestimated.

Back in January, the Obama Administration announced the consolidation of the Small Business Administration as a larger general agency combined with other government agencies – the Department of Commerce, U.S. Trade and Development Agency, Office of the U.S. Trade Representative, Ex-Im Bank and the Overseas Private Investment Corporation.

The decision seeks to cure a widespread malady in government, the agencies’ overlapping functions as brought up by the “Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue” report.

According to the announcement, the move will save an estimated $3 billion over 10 years, which seems not too much in the general scope but experts say it is a good start. However, my concern is related to Hispanic small business owners and how they will be able –or not–to navigate the new system.

As it is, the SBA definition of “small business” includes the following:

  • In manufacturing, the maximum number of employees may range from 500 to 1500, depending on the type of product manufactured;
  • In wholesaling, the maximum number of employees may range from 100 to 500 depending on the particular product being provided;
  • In services, annual receipts may not exceed $21.5 million, depending on the particular service being provided;
  • In retailing, annual receipts may not exceed $21.0 million, depending on the particular product being provided;
  • In general and heavy construction, annual receipts may not exceed $17 million, depending on the type of construction;
  • In special trade construction, annual receipts may not exceed $7 million.

According to the U.S. Census Bureau, there were 2.3 million Hispanic-owned non-farm U.S. businesses operating in the fifty states and the District of Columbia in 2007. There are 37 percent of Hispanic-owned U.S. firms operating in construction and repair, maintenance, personal and laundry services sectors.

These firms accounted for 10.4 percent of all U.S. businesses in these sectors. Wholesale trade, construction and retail trade accounted for 50.8 percent of Hispanic-owned business revenue.

The survey makes a distinction between employer firms – those who employ people – and those who don’t. Employer firms accounted for only 11 percent of the total number of Hispanic-owned firms and 79.5 percent of Hispanic-owned firms’ gross receipts. Average receipts for these firms were $1.1 million, totaling $274.5 billion.

Also in 2007, 2.0 million Hispanic-owned businesses had no paid employees, with average receipts of $35,149, and generating $70.7 billion. Evidently, Hispanic-owned small businesses are at the very bottom of the “small business” definition. Most of these are family “mom-and-pop” businesses that are usually left out of the private or government funding umbrella.

So where do they go for help and funding?

Usually, Hispanic business owners do not count on government help. Mostly funded by their owners’ own savings, loans from extended family or personal credit cards, many times they lack of formal business training or experience. They also trust their families and local community networks for business advice and additional funding.

Because of that trust, success in their business means taking care of their families, extended families and their community, a 2011 study conducted for Massachusetts Mutual Life Insurance Company (MassMutual) reveals. Their families being their first priority, Hispanic businesses usually support their immediate and extended family members. Some of the study’s conclusions say that:

  • More than half started their business because they wanted something tangible to pass on to their children.
  • 70 percent plan to pass their business on to their spouse or children.
  • Nearly one-third started their business to provide jobs for family members, and 65 percent have one to four relatives or family members working with them.
  • Compared to only 48 percent of the general population, 70 percent of Hispanics have relatives beyond spouses and children who are dependent on their business’ success.

Their spouses and children are their preferred financial advisors and they worry about protecting their families in the event they would be unable to continue managing their business. In this case, “personalismo,” an important value for this community, plays against these hard-working business owners. So many responsibilities overwhelm them, and they usually feel intimidated to seek financial education, formal and systematic business knowledge and preparation, or any other opportunities that would make their businesses thrive.

Despite the cultural roadblocks that might exist in this community, the reality is that navigating the governmental red tape can be discouraging, especially for those with language barriers. The road to increase Hispanic business participation starts with acknowledgment of their power in the national business scene. As in politics, Hispanics are taking over an important role that might define many aspects of the U.S. economy, including community involvement and extended civic responsibilities.

These instances need to be contemplated in the new proposed structure. Hopefully, the new agency will acknowledge these types of cultural and behavioral differences among Hispanic-business owners and plan accordingly their outreach to get these businesses involved in a formal setting helping them develop to their full capacity.

[Photo By Monica’s Dad]

Subscribe today!

  • This field is for validation purposes and should be left unchanged.

Must Read

Analysis: Julián Castro’s unsuccessful bid for president wasn’t really an ending

Victor Landa January 7, 2020

Julián Castro is out of the race for president, but that effort left him well-positioned for future runs, including the one for the second spot on a national ticket later this year. […]

Deadly earthquake rocks Puerto Rico, causing widespread power outage

Victor Landa

San Juan — A 6.4-magnitude earthquake struck Puerto Rico before dawn on Tuesday and was followed three hours later by an aftershock measuring 6.0. They were the largest in a […]

Latino-Owned Businesses May Be the U.S. Economy’s Best Bet

Victor Landa January 23, 2020

They’re called LOBs for short, but they’re working on a fastball. Latino-owned businesses are starting faster than the rest of the startup population and becoming a bigger part of the […]

At 100, Odon Cardenas, ex-POW still hears the ‘Screaming Mimis’

Victor Landa February 3, 2020

Excited at the chance to mark the milestone of his birth to the minute, Odon Cardenas stayed up until midnight, even as the whole family fell asleep. He was, after […]