Earlier this year, the Stanford Latino Entrepreneurship Initiative (SLEI) at Stanford Graduate School of Business (GSB), in collaboration with the Latino Business Action Network (LBAN), released the annual State of Latino Entrepreneurship (SOLE) research report, highlighting the latest trends in Latino entrepreneurship in the US. According to the report, US Latinos continue to strengthen the American economy by creating employer businesses at a faster rate than white-owned businesses and have outpaced the revenue and job creation rates of white-owned businesses and American businesses at large.
“The 8th annual SOLE report highlights the remarkable achievements of Latino entrepreneurs whose success is reflected in the rapid growth of new businesses, creation of jobs, and their ability to adapt business practices in the aftermath of the pandemic,” said Barbara Gomez-Aguinaga, PhD, associate director, SLEI. “Spotlighting the disparities between Latino and white business owners in accessing capital and government and corporate contracts provides the starting point to address these issues that prevent Latino business owners from reaching their full potential.”
The annual report is based on a national survey of more than 10,000 business owners approximately 5,000 Latino owned employer businesses and 5,000 non-Latino, white owned employer businesses, which served as a benchmark comparison group.
LATINO-OWNED BUSINESSES CREATE JOBS
From 2007 – 2019, the number of Latino-owned businesses grew 34% nationally, while white-owned businesses dropped by 7%. During the same period, Latino-owned businesses outpaced white-owned businesses in revenue growth rates and their annual payroll grew over twice as fast (92% vs 42%). During the pandemic (2019-2022), the median growth rate in revenue for Latino-owned businesses was 25% vs. 9% for white-owned businesses.
Other key themes and findings from the 2022 report include:
Access to capital and financing
Although Latino-owned businesses have equal or even better business metrics than white-owned businesses at the time of application for national bank loans, Latino businesses have substantially lower approval rates when applying for larger loans ($50k+) and higher rates of approval for small loans (<$50k).
• Latino-owned businesses are 50% more likely to request financing than white-owned businesses.
Access to corporate and government contracts
Latino-owned businesses receive substantially smaller contracts that take longer to secure from corporations and governments than white owned businesses.
• Corporate contracts secured by Latino-owned businesses are 3.3 times smaller on average than white-owned businesses, and state and federal government contracts are more than 30 times smaller than white-owned businesses.
• Among businesses obtaining government contracts in 2022, approximately 37% of white-owned businesses reported a negotiating period of less than six months compared to 20% among Latino-owned businesses. 37% of Latino business owners reported more than one year to close a contract compared to only 27% among white business owners.
Pandemic business recovery
• The Great Resignation has hit Latino-owned businesses harder than white-owned businesses, with more Latino businesses reporting challenges in employee retention and recruitment.
‘Spotlighting the disparities between Latino
and white business owners in accessing capital
and government and corporate contracts
provides the starting point to address these
issues that prevent Latino business owners
from reaching their full potential.’
• Despite being more adversely impacted by COVID-19 in 2020 and 2021 when compared to white-owned businesses, Latino business owners are now more likely to say they have recovered and are doing better than before the pandemic.
“Our research offers critical insights into the impressive gains made by Latino entrepreneurs while also revealing the impact of systemic barriers facing many Latino business owners,” said Paul Oyer, senior associate dean for academic affairs at Stanford GSB and SLEI faculty director. “The findings are a valuable tool to inform data-driven policy and programs to support Latino entrepreneurs who continue to have an extraordinary impact on the US economy.”
The US is currently home to more than 62.5 million Latinos, representing 19% of the US population. With an economic output of $2.8 trillion, there are approximately five million Latino-owned businesses across the US, generating more than $800 billion in annual revenue.
ABOUT STANFORD LATINO ENTREPRENEURSHIP INITIATIVE RESEARCH PROGRAM
SLEI operates a research program that explores and expands knowledge of the Latino entrepreneurial segment of the US economy through research, knowledge dissemination, and facilitated collaboration. The program, jointly supported by LBAN and Stanford GSB’s Center for Entrepreneurial Studies, conducts an annual national survey to assess the current state of US Latino entrepreneurship and is curating a significant panel of Latino entrepreneurs to enable longitudinal research to understand trends over time.
LBAN works to make America stronger by empowering Latino entrepreneurs to grow large businesses through entrepreneurship research, education, and networks. Learn more at lban.us.
