OPINION: Latino Micro-Businesses and the American Dream

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by Heberto M. Sanchez, MPA

   It has been said that Latinos are the “sleeping giant” in the realm of US politics. Some will even argue that this giant is now slowly awakening. The historic sleeping giant analogy has also been used in reference to Latinos’ purchasing power and our ability to affect trends. Most frequently, the term is applied in these instances as a reference to Latinos becoming small business owners in increasing numbers. According to the US Department of Commerce, in 2012 there were 3.3 million Latino-owned businesses generating $474 billion in revenue. Today, there are an estimated 4.1 million Latino-owned businesses generating $661 billion in revenue. The entrepreneur spirit is alive and growing within the Latino population of the United States.

   Although Latinos are increasing the number of small businesses and play a substantial role in local job creation and economic development, there is still a misperception or even a lack of knowledge of small business loan programs among Latino entrepreneurs. This is especially true among those owners who run businesses considered too minute to be called small, and are instead considered micro-businesses. These include “mom and pop” storefronts, taco stands and street vendors, but nonetheless exist as an engine for economic development within their communities. Micro-businesses offer upward mobility into the middle class and flexibility that provides Latinos with a sense of pride and accomplishment. This is especially true for Latinas. Therefore, micro-businesses are becoming too important within the Latino community to ignore and making access to capital available for them is paramount.

   Even with the increase in Latino business owners, some Latinos are weary of obtaining loans. Yet while many Latinos fear losing control of their businesses, even more are simply unaware of the various federal grants and loan programs available to them. The Small Business Administration (SBA) increased it’s lending to Latino entrepreneurs by nearly 21 percent in the past year. For small-dollar loans (under $350,000) the increase in Latino entrepreneurs was 27 percent. Still, according to the White House, well-known federal funding programs for small businesses like the SBA Small Business Investment Company, SBA Small Business Innovation Research and SBA Micro-Lending programs are not well known to many Latino business owners. Therefore, I believe that better outreach needs to be done to Latino business owners, including those micro-business owners who are often in desperate need of funding. Many of these micro-business owners go to family and friends for financing instead of mainstream institutions or nonprofit lending associations. Additionally, I believe more government funding should be allocated for micro-lending, in order to help micro-business owners take the leap from micro “mom & pop shop,” to small business owners.

   The Latino market continues to steadily increase, and the federal government should assist mainstream financial institutions to better serve this market with increased micro-lending programs. This is especially true since a majority of these community members already sit on the fringes of the banking system due to a lack of credit or legal status. We as a nation must encourage the growth of micro-businesses and small businesses not only among Latinos, but all micro-business owners of every race in order to preserve and sustain the American Dream for future generations.

Heberto M. Sanchez is the Founder and President of the Latino Educational Fund, a 501c3 nonprofit organization founded to help Latino students improve their lives.

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