Ana Bermudez, founder of TAGit, an app that allows you to buy the clothing featured on your favorite TV shows.
They’re called LOBs for short, but they’re working on a fastball. Latino entrepreneurs are starting companies 50 times faster than any other demographic group and becoming a bigger part of the total U.S. consumer market every day. Already 17 percent of the U.S. population, the Latino community is predicted to grow to 30 percent by 2060, magnifying its effect on U.S. economic growth.
According to a study conducted by the Stanford Graduate School of Business, Latinos already owned 12 percent of all U.S. enterprises in 2012, with annual revenues of $661 billion. But the study’s poll of 1,800 Latino entrepreneurs concluded that LOBs are smaller and slower-growing than the national average. If they generated as much revenue as other U.S. businesses, the study concluded, they could add $1.4 trillion a year to the U.S. economy.
That’s a tough number to imagine, but here’s some sense of scale: It’s a stack of thousand-dollar bills 88 miles high. It’s about $4600 for every person in the U.S. It’s more than the GDP of every country in the world below the top ten.
Bottom line: It would add almost eight percent to the $18 trillion U.S. economy.
Getting LOBs up to speed won’t be easy. More than 35 percent of them are either static or growing slowly, according to the Stanford report. But nonprofit accelerators are doing all they can to change that, funding LOBs before they’re eligible for conventional financing and helping businesses that are already credit-worthy figure out how to get commercial loans. One of the largest of those nonprofits, Accion, is funded in part by by JPMorgan Chase & Co. as part of their broader strategy around inclusive small business growth — a key element of the company’s model for impact.
Banks and the U.S. Department of Treasury are not charities, so they support nonprofits like Accion because they know today’s startups will be tomorrow’s job creators, depositors, taxpayers, and, most important, the foundation for a stronger national economy, which lifts all boats.
A Few Success Stories
Like every other startup sector, the biggest challenge for most LOBs is access to capital. Of Latino entrepreneurs surveyed in the Stanford study, 70 percent reported that their funding came from personal savings, compared to 62 percent of non-Latino business owners. Only six percent received funding from commercial bank loans, compared to 11 percent of non-Latino business owners. For more context, consider this: Less than one percent of venture-backed startups are Latino-owned.
Ana Bermudez is a case in point. She used all of her savings and retirement accounts to start TAGit, an app that allows you to buy the clothing featured on your favorite TV shows. At the point when most people turn to “family and friends financing”, Ana needed an alternative, and she turned to Accion for help.
Accion actually started in Venezuela, and it now has operations in more than 30 countries. Their guidance to entrepreneurs on how to navigate the small-business environment begins with advice on micro-finance and how to get a loan. In Ana’s case, Accion managed to get her funding from the Eva Longoria Foundation.
“Had it not been for Accion, I probably would have had to go back to work, which is a big no-no for entrepreneurs,” Ana says. ‘It paints a negative picture with investors.”
For Mende Cardona, Mende’s Groom Room would have remained a pipe dream had she not learned about financing options through the Small Business Development Center (SBDC), an organization that works closely with Accion. Working as a salon manager for a chain of dog groomers in El Centro, California, Mende wanted to start a pet-grooming business of her own, but she had no capital and wasn’t sure how to acquire funding. A friend suggested talking to SBDC, and she explained her idea. The team there was able to walk her through the costs of starting her own company and showed her how to develop a business plan that would get her the funding she needed. “It made all the difference,” she says. “I wouldn't have been able to do it if I didn't have that money.”
The path to funding can be more complicated for entrepreneurs born outside of the U.S. “There are a lot of cultural differences,” Rodrigo Santoyo says through a translator. In 2004 Rodrigo and his brother Filiberto emigrated from Mexico to Denver, Colorado, and hoped to start a food-truck business. They weren’t aware how much a credit history would help, and they didn’t have one. “In Mexico, credit is used very little,” Rodrigo explains. When they applied for funding, their application was rejected.
Referred to Accion by the Mi Casa Resource Center, they learned how to start a credit history and then secure a loan. “We were able to find a lot of good people willing to help and provide education and resources for understanding how to manage your business and navigate the systems here,” Rodrigo says. When they received their loan to help them purchase their second food truck in 2016, Rodrigo and Filiberto hoped to eventually expand into a restaurant chain. Since then, they have opened two brick-and-mortar locations in 2017.
Ana Bermudez, Mende Cardona, the Santoyos brothers, and their fellow small-business owners are the people who create almost two-thirds of all new jobs in America and almost half the private-sector output of the U.S. economy. That’s why organizations like Accion, the SBDC, and others get the support of government agencies and financial giants like JPMorgan Chase.
As for Stanford’s estimate of the LOBs’ $1.4 trillion potential--that was in 2012. In today’s dollars that would be about $70 billion more, or $1.47 trillion. That’s all the money the federal government collected in taxes during the first half of this year, which was a new record.
In other words, closing the opportunity gap for Latino business owners and adding another $1.47 trillion to the U.S. GDP would be enough to buy everybody a nice little tax cut or a lot more services. Either way, that’s a home run.
A crucial component of JPMorgan Chase’s model for impact - a data-driven, strategic focus on key drivers of inclusive growth – is a focus on providing minority-owned small businesses with access to capital and resources. Through Small Business Forward, a $75 million, multi-year global initiative, JPMorgan Chase is connecting underserved small businesses with the capital, targeted assistance and support networks to help them grow faster, create jobs and strengthen local economies. The company’s strategy is focused on three key areas: (1) diversifying high-growth sectors; (2) expanding entrepreneurial opportunities in neighborhoods; and (3) expanding access to flexible capital. Over the last two years, JPMorgan Chase has committed $38 million to more than 50 Community Development Financial Institutions (CDFIs) like Accion that are helping minority- and community-based small business owners become engines of job growth and economic vitality in the neighborhoods they serve.