Esmeralda Hernandez learned to hustle at an early age. Having immigrated to the U.S. from Mexico at nine years old, she wasted no time diving into the local economy in Los Angeles.

A frequent garage sale rummager, Hernandez would purchase Barbie dolls for cheap and sell them for a profit at her neighborhood flea market the following Sunday while she was still young enough to count her age on her fingers.

The little entrepreneur didn’t stop there. Flash forward to 2016, a now grown-up Hernandez launched Beauty Creations, a makeup and skin care brand dedicated to offering customers high-quality products at an affordable price and with a cohesive product line.

“I wanted to do something a little bit different, more colorful. So, that’s kind of how Beauty Creations started,” Hernandez said.

Chief Financial Officer Miguel Hernandez – brother to Esmeralda Hernandez – highlighted “drastic” growth in the company’s sales noting about $60 million in revenue including the brand’s subsidiary companies in 2023 compared to previous years’ average of $32 million in sales. By the end of this year, Miguel Hernandez said he expects $69 million in revenue for the company, which is headquartered in Sante Fe Springs.

“A lot of the growth comes from the brand itself and Esmeralda’s story really resonating across the globe. We’re in over 40 countries, which is one of the really cool things that we pride ourselves on as well,” Miguel Hernandez said.

Beauty Creations is also finding significant traction with household retailers such as Walmart with retail distribution accounting for 90% of its sales. The other 10% is split between the company’s website and two retail locations in Torrance and Cerritos, though the company is eyeing growth on its website after recently completing a redesign driven by consumer data.

Real estate loans from Bank of America for the financing of buildings have contributed to growth as well. Most recently, Beauty Creations purchased a 90,000-square-foot building in Santa Fe Springs, three times the size of its previous location. This allowed the company to increase its product volume with the extra storage space as well as get better deals from suppliers through bulk orders.

Aside from real estate loans, Esmeralda Hernandez has not looked for outside funding and has instead fully funded Beauty Creations herself.

“We haven’t had any investors yet, maybe in the future, but at the moment … it’s all in our capital,” Esmeralda Hernandez said.

Miguel Hernandez said the company “constantly reinvested everything” and that “Esmeralda didn’t take a dollar out of the business until probably about four years ago.”

It’s not unusual for women and minority-owned businesses to operate without investors and external capital, said Tracy Gray, founder and chief executive of The 22 Fund.

While working at a venture fund in the early 2000s, Gray noticed that out of the hundreds of business plans she tracked per month, there were never any women or minority business owners the fund was working with. Considering that the very nature of venture capital is investing in growing markets, Gray found the diversity of business owners, or lack thereof, to be perplexing, especially as a woman of color herself.

Eventually, Gray started The 22 Fund, which invests in climate tech manufacturing companies and intentionally targets businesses owned by women and people of color.

Lack of access to capital

In Bank of America’s recent Women and Minority Business Owner Spotlight report, the institution found that among business owners surveyed, 60% of women, 55% of both Hispanic/Latino and AAPI business owners, and 46% of Black business owners felt they had equal access to capital.

While Gray said she is glad the majority of women and some minority groups are hopeful and feel like they have equal access, that sentiment does not align with what she sees in the finance system and what data shows us.

“Women receive only 4% of all business loans, and they have to pay them back faster, and they have to pay higher interest,” Gray said.

The BofA study also found that despite the majority of women respondents saying they had equal access, nearly two-thirds reported feeling like they needed to work harder than their male counterparts to achieve the same level of success.

The very inclination that they have to work harder than men may be the reason women do not see the misalignment in investment, Gray said. Because of the increased desire to prove themselves in the business world, they may not feel their company is advanced enough to ask for capital; meanwhile, white male business owners may not have this conflict.

“Maybe that’s why they’re not seeing the reality. They just see it takes longer, but that they’re going to eventually get it, but that hurts your company if you have to take longer to get the capital you need to grow,” Gray said.

And these feelings of needing to prove themselves are not unfounded.

Michael Ewens, a finance professor at Columbia Business School and researcher, explored the relationship between gender and race in entrepreneurial finance in the “Handbook on the Economics of Corporate Finance” published in 2023, taking cues from a large collection of research and literature.

In his work, Ewens discussed a 2014 study which showed that when examining the same pitches, investors preferred the pitches when they were presented by men instead of by women. Additionally, a 2018 study referenced by Ewens found that prospective investors ask business owners different questions based on gender.

“Questions posed to women are more likely to address issues around not losing capital or maintaining gains,” Ewens wrote.

Maria Salinas, president and chief executive of the Los Angeles Area Chamber of Commerce, said the number one challenge facing small businesses is funding.

And in the private equity industry where, as of 2022, 86% of managing directors were white men in the U.S. and Canada, the funding landscape lacks diversity.

“It’s just tougher (for women business owners) to break through in general when it comes to capital infusion, whether it’s through debt or through equity… and when women business owners struggle with that, it impacts their ability to grow,” Salinas said.

The same goes for certain minority groups.

In line with the majority of Black business owners surveyed by Bank of America feeling they had unequal access to capital, Ewens detailed a higher loan denial rate for Black borrowers, even when factors such as creditworthiness, education, wealth and industry were controlled.

Cultural impacts

Another roadblock to accessing capital boils down to differences in culture and upbringing, said Salinas, who is the first woman and first Latina to lead the Chamber.

For Salinas, whose parents were immigrants working factory and garage jobs, how to start a business certainly was not a topic of conversation around the house growing up, she said. Breaking into entrepreneurship took much trial and error, said Salinas, adding that people who are not exposed to this world may not be aware of the resources available for growth or have the connections to get ahead.

“A lot of times we don’t realize the cultural aspect of how people get moved into the entrepreneurial space,” Salinas said.

Gray agreed, stressing the difference an “in” with the business world can make. 

“A lot of the white males, they’re around this network; they learn by osmosis, their families, their friends – they know where to go for all this capital. The networks are that way. Women and people of color are outside of those networks so they don’t learn about all this stuff,” Gray said.

Esmeralda Hernandez first got connected with Bank of America after her previous bank closed her business account without notice.

Gray was impressed with the success Esmeralda Hernandez has seen without any investors, saying she has “real hustle.” But at the same time, Gray wonders how much faster Beauty Creations – and the many other women of color owned businesses – could grow with capital infusion.

“Just think if the system trusted (women and people of color) with more capital, our whole economy would change. It wouldn’t just be at a micro level but at a macro level. That’s why it’s so important… the country is leaving money on the table by ignoring this diverse segment of business owners,” Gray said.

Both Gray, through The 22 Fund, and Salinas, through the Chamber, work toward educating women and people of color on the various options for business owners when it comes to securing financing. Bank of America also has an investment team with a large L.A. presence dedicated to providing education to business owners on applying for capital as well as financing for real estate loans.

“Access to capital has always been something that is important to Bank of America,” Raul Anaya, president and co-head of business banking for Bank of America, said.

Los Angeles fares slightly better than the rest of the country when it comes to funding women- and minority-owned businesses, according to several studies. 

For Esmeralda and Miguel Hernandez, L.A. is exactly where they want to be to continue growing.

“For the culture and for the branding, L.A. is really the core of the creativity… One of the key aspects of the brand itself is the cultural authenticity that we have, especially here with the Latino community,” Miguel Hernandez said.