Today, the Stanford Latino Entrepreneurship Initiative (SLEI) at Stanford Graduate School of Business (GSB) released its annual State of Latino Entrepreneurship (SOLE) research report about Latino-owned businesses.
A joint effort with the Latino Business Action Network (LBAN), the study highlights the latest trends in Latino entrepreneurship in the U.S.
The report says that U.S. Latinos continue to strengthen the American economy by creating employer businesses. The rate is faster than white-owned businesses. And it has 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 covered more than 10,000 business owners. It gathered approximately 5,000 Latino-owned employer businesses and 5,000 non-Latino, white-owned employer businesses, as benchmark.
Faster job creation
From 2007 – 2019, the number of Latino-owned businesses grew 34% nationally. White-owned businesses dropped by 7% during the same time span.
Latino-owned businesses also outpaced white-owned businesses in revenue growth rates. 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.
1. Access to capital and financing
Latino-owned businesses have equal or even better business metrics than white-owned businesses at the time of application for national bank loans. They also 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.
2. 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.
3. 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.
Despite being more adversely impacted by COVID-19 in 2020 and 2021 than white-owned businesses, Latino business owners are now more likely to say they have recovered and are doing better than pre-pandemic times.
The U.S. is home to more than 62.5 million Latinos, roughly 19% of the U.S. population. Their economic output is $2.8 trillion.
Roughly 5 million Latino-owned businesses across the U.S. generate more than $800 billion in annual revenue.