The immigration of people from Latin America into The United States is one of the most popular and controversial topics for discussion in recent history.
What started as a small and regionally concentrated population of just over 6 million people, has expanded over time to a population of more than 50 million in the United States alone.
The Latino population has historically proved to have an enormous impact on various aspects of life in the US which includes social, political, and economical as well as the cultural aspect.
As you might have already guessed, discussing every aspect of the Latino Population in the United States of America is not possible in a single article. So as we are about business, we will only discuss a brief introduction about the economical aspect of this community here.
Latino Business Owners: The Force Behind Economic Growth in America
Often known as LOB for short, Latino-Owned Businesses are one of the fastest growing ones in the United States.
A significant amount of members in the Latino Population are opening small businesses every day and becoming a bigger part of the total US market. The growth and rate of opening a small business is highest in comparison all non-American populations in the country.
As of today, the Latino Population only makes up around 17 per cent of the US population, but considering its exponential growth, it is estimated that it will make up for more than 29 per cent by 2050.
In reference to a recent study published by the Stanford Graduate School of Business, if these businesses grow at the rate of the US average, they will add an estimated 1.4 trillion dollars to the overall US economy.
According to a recent survey, between 2007 and 2012, Latino businesses have grown by 46.9 per cent compared to the growth rate of 0.7 per cent by non-Latino Business Owners.
This statistic indicates that the Latino population makes up the majority of job providers and taxpayers.
A closer look at this number indicates the fact that without the Latino population, the small business market in the United States would see a significant drop in overall growth rate.
Debunking the Myths
There are two common myths about LOBS in the United States.
LOBS are small
Looking at the above numbers it is foolish to conclude that Latino-Owned Businesses are small. Yet some people think they are and justify the reason behind it.
They are of the opinion that LOB’s are small due to the fact that they only sell their services and products primarily to the Latino Population and therefore is not taking advantage of the complete US market.
The research quoted above proves that this myth is completely biased and is not true. It further found that more than 80 per cent of LOBs sell to the complete domestic market of the United States.
LOBS oversubscribe to Low-growth Industries
People are of the belief that LOBs are small because they oversubscribe to low-growth businesses. The research found this myth to be unrealistic and untrue because LOBS are actually over-indexed as one of the fastest growing businesses in the entire country.
The Twin Brothers Helping Latino Businesses
Why LOBS are actually small?
Although the study debunked two of the most common misconceptions about LOBS, it found out the main reason as to why LOBS are actually small.
The reason being inadequate access to capital. The research shows that the most popular forms of capital available to the LOBs are often personal savings, bank loans, credit cards and borrowing money from friends.
Surprisingly only 6.1 per cent of all LOBS have financed their businesses with corporate loans and only 2.4 per cent with government aids and funds. This clarifies the fact that the most common sources of financing that businesses generally use like VCs, angel funding and debt financing are almost absent.
According to a survey done in 2012, it was found that around 3.3 million Latino businesses were family owned and operated. These business employ an average of 8 people and generate a total of 473 billion US dollars in sales every year.
The most important aspect that was revealed by almost every survey is the opportunity gap between Latino and non-Latino owned businesses. If both these segments would be at par then almost 1.3 trillion US dollars would have been added to the United States economy every year.
LOBs have huge potential at growing if they are exposed to traditional forms of capital, businesses commonly use. Getting LOBs up to speed isn’t an easy task.
They will either be growing or will stop growing at all. But there has been a significant development in this domain. Slowly but steadily nonprofit capitalizers are funding LOBS before they become eligible for commercial loans. While with others they are helping fast-track the process for eligibility right away.
Among the few funders in this domain, Accion which is funded in part by the US Government and in part by JP Morgan Chase & Co. has significant importance.
These companies are not charities and know that funding them today will make these companies tomorrow’s job creators, taxpayers and depositors which will most importantly make the foundation of national economy stronger, thereby lifting all boats.
Some of the most successful yet well know Latin Owned Businesses include the following companies:
- Connect Assistance which is an auto-assist and home service organization
- Her Hair Company, who sells Brazilian hair extensions and has generated more than 5 million dollars in revenue in the last year alone
- Clason Point Partners is a top-of-the-line New York-based consulting firm which provides technical and administrative assistance to the government
- Globo which is an on-demand voice translation service which generated 5.5 million dollars in sales in 2012 alone
- Flite Banking Centers is in the financial industry and provides ATM management services to banks of all sizes
- Tribeca Marketing is a high-end advertising firm that works with educational clients and renders top to bottom marketing services custom tailored for them
- FedBiz IT Solutions which provides IT and security services to the government generated over 24.5 million dollars in revenue in 2012
The future is very bright in LOBS in the United States. The right amount of funding and access to capital is all they need and their impact on the economy of the USA will be beyond our imagination.