Latino entrepreneurship will rebuild and reshape the U.S. financial system

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Latino-Owned Businesses (LBOs) are not only the fastest growing segment of the US small business ecosystem, but they have also proven to be resilient.

Despite lower chances of obtaining funding from national banks, the number of Latin American-owned employer companies (companies with at least one paid employee other than the owner) rose 14% between 2012 and 2017 – more than double the US average of 6%.

Additionally, employer LOBs grew faster than the national industry average in 44 of the 50 states and 13 of the 15 industries. Some of these industries are construction, finance and insurance, transportation and storage, and real estate.

These are some of the key findings of the sixth annual report on the Status of Latin American Entrepreneurship in 2020, officially published as part of the State of Latino Entrepreneurship Forum 2021.

The report was prepared by the Stanford Latino Entrepreneurship Initiative (SLEI) at the Stanford Graduate School of Business (GSB) in collaboration with the Latino Business Action Network (LBAN).

“Supporting Latino businesses is critical to the overall economic growth and success of this country and to our economic recovery from this pandemic,” said Persis Drell, Provost of Stanford University, during the virtual launch.

In fact, before the pandemic, LOBs were moving in a positive direction. The approximately 400,000 LOBs generated annual sales of nearly 500 billion US dollars and employed 3.4 million people.

According to the report, three-quarters of LOBs last year were also profitable or even breakeven despite the challenges faced in the first few months of the COVID, although Latin American-owned companies are less likely to make a profit compared to white-owned companies -19 pandemic.

“In the midst of the chaos and crisis, we can learn a lot from the experiences of Latino entrepreneurs about how to rebuild and reshape the American economy,” said Marlene Orozco, SLEI’s lead research analyst.

An important strategy for learning from Latin American business owners is the importance of being connected to organizational or personal networks.

Latinos are more connected to organizational networks than white business owners: 42% versus 34%. This is related to higher sales growth and positive financing results.

LOBs that use organizational networks are more than twice as likely to achieve funding success than those that have not carried out network activities (63% versus 28%).