By Mike Lillis and Rafael Bernal

Latinos are three times as likely as the general population to start their own businesses, but cultural and economic factors have hampered the growth of Latino-owned businesses at a cost of trillions of dollars.

A report by the Stanford Latino Entrepreneurship Initiative (SLEI) found the lost growth amounted to a $1.38 trillion “opportunity gap” in 2012 alone.

Minority business advocates are scrambling to identify the causes and fill the void.

Latinos tend to open businesses with “personal motivations” rather than as a result of identifying market opportunities. Because of this, Latinos are less likely to pursue capitalization opportunities that put full ownership at risk, limiting their prospects for growth.

Hispanic business leaders say the lack of access to capital was accentuated by President Obama’s regulatory measures in the wake of the 2008 financial crisis.

“Hispanic businesses have it twice as bad. Under the Obama administration, the Consumer Financial Protection Bureau was so draconian that they over-regulated the financial services industry,” said Javier Palomarez, president of the U.S. Hispanic Chamber of Commerce (USHCC).

Despite their limitations, Latino-owned businesses are still the fastest-growing segment of small businesses in the country, generating around $400 billion in annual revenue, according to the Congressional Hispanic Conference.

And Latina-owned businesses have led the charge.

The number of businesses owned by Hispanic women grew 206 percent between 1997 and 2014, compared to 68 percent growth of women-owned businesses in general, according to a report by American Express.

Those businesses have been a major driver of economic growth, but they still lag behind other minority-owned businesses in employment and revenue.

According to the report, Latina-owned businesses employed, on average, 0.4 workers aside from the owners. Women-owned firms in general had 0.8 workers on average and Asian-owned businesses employed one worker on average.

Latina businesses had average revenues of $64,479, compared to $155,477 for women-owned businesses as a whole.

Aside from the structural and regulatory challenges limiting access to investment capital, Palomarez said minority business owners often don’t have the networks and know-how that other entrepreneurs take for granted.

“The USHCC is invaluable compared to a chamber that’s helping a guy who’s already got networks, connections and knows lending institutions,” said Palomarez.

The lack of connections, said Palomarez, can create a gap in the contracts available to Latino-owned businesses.

“I need to have a work order so that I can continue to grow my company,” he said.

Some Hispanic advocates are pointing to the legal hurdles they say have prevented Latinos from living up to their full economic potential. Limitations on visas for high-skilled workers, for instance, have restricted the number of innovators — the very types of people who launch new businesses — from entering the country.

Rep. Luis Gutiérrez (D-Ill.), for one, said that’s a mistake.

“Everybody talks about jobs and putting Americans to work,” he said. “Well, guess what? When are we going to invest in making sure that we create the talent pool here in the United States?”

Traditionally, slow Hispanic business growth has been attributed to a propensity to cater to crowded market segments and isolated customer bases.

But the SLEI’s analysis countered that notion.

“The results counter the perception that LOBs are small because Latino entrepreneurs choose to open businesses in small industries or because of a lack of diverse customer base,” read the report.

The SLEI will release an updated version of its report in January, and the trends have not “changed substantially,” said Tiq Chapa, one of the authors, in an email.

Continued business growth has contributed to Latino confidence in the economy.

According to a report released in June by the Pew Research Center, 81 percent of Latinos expected their family’s economic situation to improve over the next year, compared to 61 percent of the general population who said the same.

Latinos are the youngest demographic in the country — the median age for Hispanics is 28 compared to 38 for the population as a whole.

With more Latinos than ever joining the workforce, Latino entrepreneurship is expected to continue to rise. Latinos are also going to college in greater numbers, lessening the skills gap that helps drive the structural barriers to business growth.

In 2012, Hispanic college enrollment immediately after high school for the first time surpassed general enrollment, with 70 percent of Hispanics enrolling, compared to the national average of 66 percent, according to a study by the Congressional Hispanic Caucus Institute and the Society for Human Resources Management.

Your Editor Promises: We, at HMWorks, will follow up each week with information and orientation for current and potential Latino entrepreneurs. Cuenta con nosotros

By Marlena Fitzpatrick

Latinas are leading the business growth and entrepreneurship in the US. They are starting their own businesses in record numbers. According to the National Women’s Business Council, Latinas own close to 788,000 businesses in the U.S, a 45% increase since 2002. Yet we still have a way to go to ensuring Latinas—and Latinos— are able to reach their full economic potential. In fact, a recent study from Stanford Graduate School of Business shows that Latino businesses could have generated an additional $1.4 trillion in 2012 if they had been of equal average size to non-Latina/o businesses. But there are Latino/a leaders paving the way to solve this economic problem.

XL Alliance CEO, and World Economic Forum Leader Lili Gil Valletta, co-founded Dreamers Ventures, an investment accelerator for Latino/a inventors and entrepreneurs, with best-selling author Bob Circosta. They’ve partnered with entertainment and lifestyle retailer HSN for a groundbreaking pipeline program called Project American Dreams. This competition will capture the entrepreneurial spirit of Latinos in the United States, while following their real-life journey going from start-up to stardom.

After becoming a business “evangelist” in the boardrooms of some of America’s most iconic corporations— where hard-facts unveil the eminent power Latino/as, represent to the U.S. economy— she now embarks in a quest to find the next entrepreneurial star.

Lili took time to sit down with me and have a little chat regarding her new venture as host of this entrepreneurial program.

Marlena Fitzpatrick: You went from start-up to stardom yourself. What inspired you “pay it forward” and propel our community’s economic growth?

Lili Gil Valletta: After finishing my M.B.A. in the U.S. I was victim of a broken immigration system and found myself in limbo without a way to adjust my immigration status. I’ve been through the heartache of divorce, the loss of my mom to breast cancer, depression, the draining of all my savings and corporate stock options; and all have been building blocks to re-invent myself and innovate along the way. And this journey is what turned me from a successful corporate executive with a rising career at one of the world’s most admired companies, Johnson & Johnson, into an entrepreneur driven by the possibility to deliver purposeful profits becoming the expert business leaders call to understand and unlock the power of today’s diverse America. I do it leading with financials, with a business case and even big data, because we (Latino/as) are not an altruistic mission for corporations, but a vital – and probably the only – source of accelerated incremental business growth.

MF: Thank you for sharing your story. Speaking of journeys, how much time did it take to bring Project American Dreams into a reality?

LGV: Project American Dreams has been almost a year in the making, to insure the right alliances were established under the Dreamers Ventures umbrella, and to have a best in class network of mentors, resources and access to capital for Latino/a inventors.

MF: What is Dreamers Ventures?

LGV: Dreamers Ventures is the beginning of what could become America’s first Latino product, design and fashion innovation incubator! Bringing under one-roof quick access to the mentoring, know-how, resources, access to capital and commercialization that often slow down or prevent dreams from turning into reality. Many incubators and accelerators do focus on STEAM, which is critical, but we still live in a consumer economy where people have a lot of ideas, gadgets and innovations to solve everyday problems, and Latino/as are notorious for being resourceful; getting creative to make things work! Dreamers Ventures came to reality after we consolidated a formal alliance with Bob Circosta, “TV’s Billion Dollar Man” Bob Circosta, a pioneer of the multi-billion dollar live television shopping industry, Access Latina, Prospanica, USHCC, and many other academic and business organizations.

MF: True, we are resourceful, creative and entrepreneurial. Now, you talk about economy problems. What issues does Dreamers Ventures will bring to the forefront through Project American Dreams?

LGV: While the increase in the number of Hispanic businesses outpace all others by 15 times, less than 1% of Latino/a owned businesses report getting venture capital and angel funding, and 42% are rejected by banks and commercial institutions. Instead, 68% of us start on our own, by ourselves, often draining our own savings and credit cards; which stalls growth and makes us earn 27 cents to the dollar of revenues of other small businesses! This is not only a bad business proposition to Latino/as, but to the American economy that depends on small businesses to create 60% of new jobs and drive growth. And these numbers became a new rallying cry for my team and I. We embarked on a mission to create a platform that would be part of the solution. This is important because participants will gain access to a networks, mentors, resources and the unique opportunity to launch your product.

MF: What are the economic problems addressed in this project and what are the solutions presented by this project?

LGV: The problems can be packaged simply in three bullets and compelling statistics. And we are not only supporting, but propelling their access to these vehicles for growth.

1. Mentoring: 77% of Latino/a entrepreneurs say mentoring is important, yet only 34% of them have mentors. Many times is because they are homegrown, family businesses, or the entrepreneur is a first generation college graduate without the Rolodex. We are opening this Rolodex for them to propel growth through the Dreamers Ventures network.
2. Access to Capital: As stated, less than 1% of Latino/a entrepreneurs report getting venture capital or angel funding and 42% are rejected by banks and institutions. Our network plans to connect the winners to entities for investment and with the support of U.S. Bank to financial guidance and products made for them. We are also in the early stages of developing a Dreamers Ventures Fund.
3. Distribution/ Commercialization: HSN, the $4 billion dollar company who has turned everyday entrepreneurs into iconic sensations like Joy Mangano, is the ultimate “door” or multimedia shelf. What make this unique instead of gaining traditional shelf space at a store or going on an eCommerce site is that HSN allows for the human connection, the backstory and product demonstrations to be told; giving Latino/as the great opportunity to better connect with a story that is deeper than selling a “thing.”
4. National Visibility and Marketing: Dreamers Ventures offers marketing, PR and advertising to the winners. Many times that is a hurdle to entrepreneurs and start-ups who lack capital for it. Through this process they will gain national media exposure and have a network to tell their full story to over 94 million households.

MF: Let’s talk about the obvious, you’re a Latina in business. Latinas outpace every other group as business owners. How does Dreamers Ventures help Latinas as part of Project American Dreams?

LGV: Besides the growth in population size Latino/as represent, Latinas in particular make over 80% of the purchasing decisions at home and are growing as small business owners. U.S. Latinas are embracing entrepreneurship with the number of Latina firms rising 46% from 2002 to 2007, faster than Latinos (33%) and faster than total female (20%) businesses.

MF: What’s the best advice you could give all Latina entrepreneurs?

LGV: There are several points I’m always bringing to Latinas’ attention:

• Let love for your idea, product, or company and purpose drive you; not money. The money will follow when your heart is in the right place.
• Know your numbers, market size, competitive landscape, projections, sales, and have a forecast. You can’t wing your way into success without numbers; that will make you run blind
• Network, network, network! There are numerous resources for women and Latino/a entrepreneurs and many time entrepreneurs simply don’t show up. Chambers of Commerce, SBA resources, minority councils, etc., they are all available in every cities across American offering services many times for FREE.
• Don’t be afraid to ask for money. Angel funding is a fancy term simply for getting money from friends and family. If you believe in what you are building, leave pride aside or the need to impress, and simply ask. And when you are ready with a business plan, go to institutions for help. Make tapping into your personal savings and credit cards a plan B or C.
• And last but not least, never ever forget where you come from. Forgetting where you come from may limit the vision of where you are going. Stay authentic, anchored on your Latinidad (because that makes us unique after all) and pay it forward to elevate others and the generations ahead.

Follow Lili Gill Valetta @liligil

Follow Project American Dreams @DreamersVenture

Your Editor Alerts: Behold the entrepreneurial power.

A new study reveals that Hispanic-owned businesses are at the top of the ranks at the moment. According to the 2016 Hispanic Small Business Credit Study*, Hispanic-owned company revenues have gone up $68,540 from the previous year’s reported annual revenue of $202,327.

The Average net income for Hispanic businesses increased from $50,205 in 2015 to $132,693 in 2016. Non-Hispanic business owners have actually decreased 8 percent for the present year.

“A major take-away from this study is that small businesses have been performing well in the past year and many of them are looking to expand their operations. Our analysis also revealed that the gap between non-Hispanic and Hispanic businesses is shrinking considerably,” said Rohit Arora, CEO of Biz2Credit, one of the nation’s leading experts in small business finance.

Steady Growth

Hispanic-owned businesses are growing fast. 15 times faster than the current national rate, to be exact. Over the course of the last 8 years (2007-2015), revenue of Hispanic-owned businesses dramatically increased to about 88 percent, summing up to approximately $661 billion.

Credit Scores: A Hispanic-Owned Businesses’ Potential Weakness

Setting aside the positives, a major cause for concern has always been found in Credit. Hispanic businesses’ lower average credit score (595) in comparison to Non-Hispanic businesses’ (608) has always been a potential reason for downfall.

Arora explained, “The fact that average credit score for Hispanic entrepreneurs falls below 600 is still a cause for concern because that is a benchmark that many banks use before they even consider processing a loan request,”.

*In the Hispanic Small Business Credit Study, Biz2Credit analyzed the financial performance of 2,000 Hispanic-owned businesses as well as 25,000 other companies with less than 250 employees and lower than $10 million in annual revenues. All of those businesses were compared with 20,000 + companies owned by non-Hispanics, all in the United States.

Your Editor Promises: We will pay more and real attention to Entrepreneurship among Latinos. Please send suggestions to [email protected]

By Rohit Arora

Over the last decade, Hispanic-owned companies have grown at a rate 15 times higher than other firms, the U.S. Hispanic Chamber of Commerce said.

There is no faster-growing group of entrepreneurs in the United States than Hispanic business owners.

Over the last decade, Hispanic-owned companies have grown at a rate 15 times higher than that of all other firms, according to the U.S. Hispanic Chamber of Commerce.

In the mid-Atlantic region — consisting of New York, New Jersey and Pennsylvania — there has been a 20% increase in Hispanic-owned companies in the years between 2012 and 2015.

Last year, Hispanic entrepreneurs — represented by more than 4 million companies nationwide — contributed more than $600 billion in revenue to the national economy.

Yet despite these recent developments in business growth, they are still behind in key financial performance and business factors in their companies.

A new study of more than 25,000 companies across the country that applied for a small business loan on Biz2Credit’s platform, revealed that Hispanic-owned companies had average annual revenues of $202,327 over the last 12 months, while non-Hispanic-owned businesses had average annual revenues of $206,855 during the same period.

In New York, the numbers in all the categories of data were higher. The average annual revenue for an Hispanic-owned firm was $311,194, as opposed to the national figure of $202,327.

Meanwhile, non-Hispanic-owned businesses in New York had an average revenue of $770,379. The average operating expenses for New York’s Hispanic-owned businesses was $145,929, compared to $437,010 for non-Hispanic-owned companies.

These results aren’t all that surprising since the average age of a business was 46 months (a little less than four years) for Hispanic-owned companies was lower than the average age of non-Hispanic-owned firms at 63 months (a little more than five years).

The younger age of business and lower revenues and expenses are indicators of start-up growth.

Among the most popular categories for Hispanic-owned companies in New York are:

• Services: 24.4%
• Retail Trade: 16.9%
• Accommodation and Food Companies: 16.9%
• Construction: 13.4%

The average credit score for Hispanic entrepreneurs was 609, slightly above the critical 600 benchmark that many banks use before they even consider processing a loan request. (For non-Hispanic-owned companies in New York, the average credit score was 625.)

Having adequate access to capital is essential in the start-up phase for growth, and low credit scores can hinder that ability to secure a loan at attractive terms.

The encouraging news is that there was a 68.7% increase in small business loan applications by Hispanic entrepreneurs over the last 12 months.

Much of that growth came from the New York metropolitan area, which has a Latino population of approximately 2.3 million, the largest in the U.S., according to HispanicResearch.com.

Fortunately, the community benefits from non-profit organizations such as the New York State Coalition of Hispanic Chamber of Commerce (NYSCHCC), which offer valuable resources to foster the growth and development of Hispanic-owned companies.

By 2050, the Hispanic population in the U.S. is expected to reach 106 million, approximately double today’s figure, according to the latest Pew Research.

As this population continues to grow substantially, their importance in company formation and job creation involvement in the economy will be even more vital.

Rohit Arora is the CEO and co-founder of Biz2Credit.com, Rohit was named Crain’s NY Business “Entrepreneur of the Year 2011.”

Your Editor Asks: Is entrepreneurship the fourth demo?