How can Utah better support its Latino entrepreneurs?
According to a recent article by JPMorgan Chase & Co., Latino-owned businesses are being started in record-breaking numbers and driving entrepreneurship in the United States. Over the past 10 years, Hispanic entrepreneurs have continued to start small businesses at a rate of 44 percent, much higher than their non-Hispanic counterparts, according to a meta-analysis from SCORE, a resource partner of the U.S. Small Business Administration (SBA).
While startup rates are incredibly high, the growth of these businesses tends to happen at a slower pace. If these Latino-owned businesses grew at the same rate as the national average, they could add billions to the U.S. economy, according to the State of Latino Entrepreneurship report from the Stanford Graduate School of Business.
According to the World Population Review, Utah has the 13th highest Hispanic population of all 50 states at 14.8 percent. Experimental population projections by the Kem C. Gardner Policy Institute expect Utah’s Hispanic population to increase by 39 percent by 2030.
While significant steps are being taken to promote the prosperity of Hispanic entrepreneurship and startup rates continue to increase, providing support for businesses after they are established could show the most impactful results.
“I believe Latinos are used to challenging economic conditions and adversity,” says Moisés Agami, CEO of Valor Capital and a Mexico City native. “Latinos are also used to living and working together within the family unit. It happens to be easier to open a business when your family (father, mother, brother, sister, cousin, etc.) is a part of it. Maintaining family unity helps support startups and help them through the difficult time when they may not have sufficient capital to pay wages.”
In January, WalletHub ranked Utah the #1 state to start a business. Still, it is difficult for startups to gain traction.
“Data from the Bureau of Labor Statistics shows that approximately 20 percent of new businesses fail during the first two years of being open, 45 percent during the first five years, and 65 percent during the first 10 years. Only 25 percent of new businesses make it to 15 years or more,” Agami says. “It takes a lot of courage to open your own business.”
Valor Capital is a thriving Hispanic-owned business, with 2022 revenues of around $70 million, according to Agami. He took his first venture public at the age of 25 and credits community and common goals as the keys to success. “I believe there is much to be learned and shared as to the unity and support that Latinos give each other as a community,” he says. “As the old saying goes, ‘Tough times don’t last—tough people do.’”
According to the United States Census Bureau, startups create more jobs than older firms. This means that the success of startup businesses positively impacts business owners, investors, and the general workforce.
Access to capital is a large part of the struggle for Latino-owned startups. Seventy percent of startup costs for Latino-owned businesses are paid out-of-pocket from personal savings, according to Stanford’s State of Latino Entrepreneurship report. Only 6 percent of startup costs are paid for through commercial loans.
Entrepreneurs born outside of the U.S. have an exceptionally difficult time accessing funds. Credit history is an important piece of the puzzle when starting a business, and in many countries outside of the U.S., credit is not emphasized. Without a credit history, applications for funding are often rejected without consideration. Stanford estimates that if the growth rates were to improve, Latino-owned businesses could contribute an additional $1.4 trillion to the U.S. economy.
“The number one barrier for success in the United States for all minority business owners, of which Latinos are the largest, is access to capital,” says Silvia Castro, executive director of the Suazo Business Center. “Systemic barriers have been in place for decades in this country, many of which were designed to stop people of color from obtaining loans or made the process very difficult. While the country has evolved over time to be more accessible, some of these barriers have become part of the culture of the United States, and access is still unequal across the demographic spectrum.”
Castro says this inequality is seen when Latino-owned businesses, compared to their white counterparts, are asked for more collateral or offered higher interest rates for the same products.
“The second barrier we see is a lack of education about opportunities and processes,” she continues. “Having equal access to education on rules, regulations and compliance—or being taught best practices and knowing that a partnership with your banker is essential—would go a long way.”
"Systemic barriers have been in place for decades in this country, many of which were designed to stop people of color from obtaining loans or made the process very difficult. While the country has evolved over time to be more accessible, some of these barriers have become part of the culture of the United States, and access is still unequal across the demographic spectrum."
Latino business owners must seek out specialized sources to obtain these educational opportunities, Castro says. The Suazo Business Center was created because of this.
“Our founder, Gladys Gonzalez, was a very successful bank executive and diplomat from Colombia. When she moved to the United States to flee the cartels, she knew she needed assistance to understand the American business system,” Castro says. “She sought help through the channels that existed then and still exist now, and they were unable to help her.”
On a federal level, there is a promising wave of support for Hispanic-owned businesses, including the recent announcement of the Biden-Harris administration’s cross-country Latino Prosperity Tour. The tour features resources that “support education, housing, entrepreneurship and more as strategies to generate economic growth and address the racial wealth gap,” according to a press release from the SBA.
“President Biden knows that America’s future prosperity and global leadership is tied to the success of Latino families and communities,” an official statement from the White House says. “Latinos must receive equitable opportunities to share in the recovery from the pandemic and the investments we are making to build back better than before.”
Limited information has been released about the tour stops at the time of this writing, but it has been noted that underserved Latino communities will be directly engaged. There are no official statements on whether Utah will be included in the tour.
Organizations like the Utah Hispanic Business Bureau and the Utah Hispanic Chamber of Commerce offer services for Hispanic entrepreneurs and business owners. The Utah Division of Multicultural Affairs “focuses on increasing awareness, education, and access to resources for communities to be more civically informed,” according to the organization’s website. Government resources are difficult to come by, however.
“Utah has an interesting attitude toward Latinos,” Castro says. “On one hand, they do realize that we are here, starting businesses, running different industries, employing people and expanding economic opportunities, but we are largely ignored as a group and considered not ‘minority enough.’ This shows up in the types of opportunities we are offered and through funding, government appointments, notoriety and presence where decisions are made.”
Castro points out that, in some Utah municipalities, Latino residents make up nearly 35 percent of the population—yet in these same communities, only a small fraction of the people in positions to make decisions for the population are Latino.
“This lack of representation is commonplace in our state,” Castro continues. “There are countless stories of strong, intelligent, hard-working Latino professionals who leave Utah because the opportunities afforded to them are scarce compared to other markets outside Utah.”
Utahns can contribute by making an active effort to support local, Hispanic-owned businesses. As rising costs continue contributing to business struggles in the state, buying, sourcing and contracting intentionally can help increase revenue where it is most needed.
“Latinos are natural entrepreneurs. A significant number of our communities’ Latinos are first, second, or third generation,” Castro says. “At the Suazo Business Center, we estimate 70 percent of our clients are first-generation immigrant Latinos. Part of the immigrant story is the desire and urgency to take care of family and move up economically. Most people do not leave their homes, families and social networks unless they think the reward would be a greater benefit than the risk of leaving.”
“People who are willing to immigrate to another country—with a different language, a different culture, and a different way of life—are inherently more audacious than those who are not willing to risk leaving what they know, Castro says.
“Utah prides itself in its strong economy, strong family support and a strong commitment to community. Latinos are key to every one of these markers,” she continues. “Half of the growth in population in the last census came from the minority population. Latinos will continue to be a bigger and bigger part of the workforce. All you have to do is look at the percentage of our kids in K-12. Ensuring they are prepared, educated and given the resources for their best potential will ensure Utah will keep its strong economy and lift up Utah as a whole.”