Conchie Fernández is the head of CF Creative, a business development, communications and marketing firm based in Miami, Florida. She employs 15 people, and her husband is her business partner. The company’s annual gross income is around $700,000.

Struggles with financing, cash flow management, savings to start the company – which slowed down its growth early on – and being debt-averse are some of the topics mentioned about that company in a report by the Federal Reserve Bank of New York, Interise and the Stanford Latino Entrepreneurship Initiative (SLEI) which analyzes the current state of Latino enterprises and their challenges and trends.

The study points out that, between 2007 and 2012, the number of Latino businesses grew 47 percent, while non-Latino ones have consistently dropped by 2 percent. This growth has persisted after the recession.

This is worth noting because, proportionally, the Latino population has more entrepreneurs than other communities in the U.S. The report also found that Latino entrepreneurs are increasingly becoming job creators. Between 2014 and 2016, Latino businesses with employees grew at a rate of 13 percent, in contrast to 3 percent for non-Latino enterprises.

Still, the percentage of entrepreneurs without employees remains high. Compared to other communities, and in general terms, Latino companies are smaller, younger (most were created in the last six years), have very young managers and focus on specific sectors including transportation, construction, bars and restaurants, and administrative services. By contrast, the number of businesses offering consultancy, scientific and technical services is lower.

Regarding size, only 21 percent of all Latino-owned companies with employees have earnings surpassing $1 million, compared to 32 percent of businesses owned by white entrepreneurs.

This entrepreneurial class also faces clear disparity when it comes to having access to capital funding from financial institutions.

According to data analyzed by SLEI, 69 percent of Latino companies rely on savings. This is Fernández’s case: To stay afloat, she combines her own savings with the revenue her company generates. According to the study in Miami, the city with the highest number of Latino-owned businesses, the most popular sources of growth capital for Latino-owned businesses are savings, family and friends (16 percent). Fernández said that she is averse to debt, “unless there is a deep reason for it.”

Only 6 percent of Latinos have access to capital funds from commercial banks, compared to 11 percent of non-Latinos. When denied credit, they resort to financial tools such as cash advances and credit cards, which have higher interest rates. When they do obtain financing, they receive less than they need. On the bright side, Latino entrepreneurs have fewer problems with debt.

Another matter in which Latino entrepreneurs lag behind is that, although many of their families have entrepreneurial roots and they often involve their relatives in their company’s development, Latino businesses tend to remain small, so there are few role models to follow when the time to grow comes.

Interestingly, one of the issues the report brings to light is that the number of Latino entrepreneurs is not higher in areas where that community is larger and where there is more opportunity to flourish.

In proportion to the population, the Miami/Fort Lauderdale/West Palm Beach area has the highest number of Latino entrepreneurs (17.9 percent) compared to non-Latinos (30.2), followed by Tampa/St. Petersburg/Clearwater, also in Florida, and the metropolitan area of Washington/Arlington/Alexandria in D.C., Virginia and Maryland. Continue reading

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