In the vibrant tapestry of the U.S. economy, Latino-owned businesses have emerged as a dynamic and influential force. These entrepreneurs are creating businesses at over twice the rate of the general U.S. population, as their community necessitates high levels of innovation and ingenuity. New businesses owned by Latinos accounted for 36% of launches in 2023, according to a new analysis of Census Bureau data.
The Breakdown You Need To Know:
Latino-owned businesses are on a transformative journey, set to revolutionize the U.S. economy as they are projected to make up 29% of the population by 2050. Imagine the potential unlocked when these businesses grow at the same pace as the U.S. average, contributing a staggering $1.4 trillion to the economy, according to JPMorgan ChaseJPM +0.4%. That’s nearly an 8% boost to the $18 trillion economic giant that is the United States, all thanks to Latino Americans’ entrepreneurial spirit.
Growth and Revenue:
As of 2023, Latino entrepreneurs have established a staggering five million businesses across the United States, collectively generating over $800 billion in annual revenue. CultureBanx reported that these businesses not only represent nearly one-fifth of the U.S. population but also contribute significantly to the world’s fifth-largest GDP.
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The rapid pace of this growth is further highlighted by the fact that the number of Latino/a-owned businesses surged by 34% from 2007 to 2019. Figures like these are starkly contrasting with a 7% decline in the number of white-owned businesses over the same period.
Economic Contribution:
Latino-owned businesses’ economic contribution to the U.S. economy is profound. These savvy enterprises are responsible for creating almost two-thirds of all new jobs in America, accounting for nearly half of the private-sector output.
With Hispanic employer businesses employing about one million workers and contributing more than $100 billion in annual payroll, their impact on job creation and economic growth is undeniable. As these businesses continue to grow and diversify, they not only bolster the U.S. economy but also highlight the vital role of Latino entrepreneurs in shaping a more inclusive and dynamic American business landscape.
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Financially Fuelling Latino Entrepreneurs:
Despite the impressive growth and contributions of Latino-owned businesses to the American economy, these entrepreneurs face a myriad of challenges, particularly in securing financing. A striking 70% of the initial funding for Latino-owned businesses comes from personal savings, showcasing a strong commitment and belief in their ventures.
While one in three Latino-owned businesses sought out financing in 2022, with bank loans being a popular choice, they encountered lower approval rates for loans over $50,000 compared to white-owned businesses. On the equity side, the disparity becomes even more pronounced, with less than 1% of all venture capital funding in 2021 allocated to Latinos.
This stark underrepresentation in venture capital funding exacerbates the financial challenges Latino entrepreneurs face. However, there are organizations like Endeavor Miami and Accion that play a crucial role by offering essential resources, pre-conventional business financing and guidance to bridge the gap to more substantial funding sources.
What’s Next:
Latino-owned businesses are not just a burgeoning force within the community; they’re a powerhouse propelling the U.S. economy forward. Collective efforts between venture funding, accelerators and traditional banks could address the immediate challenges of financing, while also laying down pathways for sustainable growth and contribution to the U.S. economy. With such mechanisms in place, the future looks promising for Latino entrepreneurs, poised to break new ground and continue their trajectory of impactful economic contribution.
