![]() The survey also found that Latino-owned businesses that participated in formal business organizations, such as trade associations or chambers of commerce, were more likely to be successful in getting funding. “We were asking questions, and the banker, instead of saying, ‘Go to the website,’ would say, ‘Sit down and let me call someone right now.’ It felt good to be talking human-to-human.” “The relationship you have with your banker makes a huge difference, because they’ll go to bat for you,” said Dora Herrera, president of Yuca’s Restaurants in Los Angeles and Pasadena, California, who believes her long-standing relationship with her national bank led to her getting a Paycheck Protection Program (PPP) loan during the pandemic. Having a banker guide an entrepreneur through the loan application process can make the difference between approval and denial. The survey did not determine the reasons for the discrepancy in lending outcomes, but the findings - and the experience of some business owners - point to ways Latino entrepreneurs may be able to boost their chances of loan approval. Latino-owned businesses were younger than White-owned businesses: an average of 10 years old compared with 14 years. About three-quarters of businesses in both groups had broken even or been profitable in the last 12 months, though White-owned businesses were, on average, slightly more profitable than Latino-owned businesses. The survey found that Latino- and White-owned businesses had largely similar profiles in terms of credit risk and liquidity. A smaller group of Latino-owned businesses was surveyed in March, June, and September 2020 to track the impact of the pandemic. The survey covered June 2019 to June 2020 - capturing the first part of the COVID-19 pandemic but primarily looking at pre-pandemic activity. The finding about loan approval was made possible by the inclusion for the first time of 3,500 White business owners in the survey, in addition to more than 3,500 U.S. ![]() Even after controlling for business performance measures, the odds of loan approval from national banks were 60% lower for Latino-owned businesses. The discrepancy was even larger when looking at firms with annual revenues over $1 million who were requesting similar-size loans: 29% of Latino-owned businesses got the loans vs. Overall, the survey found that 20% of Latino-owned businesses that applied to national banks for loans over $100,000 received funding, compared with 50% of White-owned businesses. The report is based on a survey of “employer” businesses that have at least one paid employee other than the owner. ![]() The 2020 State of Latino Entrepreneurship report found that Latino-owned businesses are significantly less likely than similar White-owned businesses to have loans approved by national banks. Recent research by the Stanford Latino Entrepreneurship Initiative offers detailed insights into the difficulty Latino entrepreneurs often have finding funding for their businesses - and points to some ways these entrepreneurs may be able to improve their odds of success. Latino entrepreneurs like Jonathan Garcia, CEO, Simmitri Solar are significantly less likely to have their business loans approved by national banks.| Nathan Bietz ![]()
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