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Latino-owned Businesses: Potential Boon For Economy

Study commissioned by newly-formed Latino Business Chamber shows Latino businesses are positioned to grow

Eastern Group Publications , News Report, Elizabeth Hsing-Huei Chou Posted: Jul 18, 2009

Latino-owned businesses are the key to bringing jobs and revenue back into the economy, according to findings in a UCLA study commissioned by the Latino Business Chamber of Greater Los Angeles, LBC-GLA.

More than half of all minority-owned businesses in the Los Angeles region are Latino-owned, and as of 2002, they generated $35 billion in sales, according to the studys report Strengthening Latino Businesses in Greater Los Angeles.

The study suggests Latino-owned businesses, which make up the largest share of minority-owned businesses, also has the greatest ability to create an impact on the regional economy.

LBC-GLA commissioned the study with financial support from Wachovia Bank and unveiled the findings produced by Dr. J.R. DeShazo, Director of the Lewis Center in the UCLA School of Public Affairs, and unveiled the findings during a packed reception held at the Los Angeles River Center on July 9.

The study is the basis by which we move forward as a think-tank for the future. It provides information for future deeper investigations into the building blocks of Latino small and mid-sized businesses and their significance to the larger overall economy, said Jorge Corralejo, Chairman and CEO of the LBC-GLA.

Organizations like LBC-GLA can help advance policies that address findings from the study, DeShazo said.

Trends show the sales receipts of Latino-owned businesses is on an upward trajectory, with a growth of 3.43 percent between 1997 and 2002. The sectors in which Latino-owned businesses concentrate i.e. construction, manufacturing, and retail are also the ones that tend to lead the regional economy out of the recession.

Latino firms are in critical sectors of the economy, both traditional sectors that need to remain strong and entering new sectors like the green jobs sectors that are going to grow the regional economy, DeShazo said to the audience of LBC-GLA members and other interested groups.

Potential for Return on Investment High

DeShazo writes in his report, Latino businesses are likely to offer the highest return on investment because of the distinctive characteristics of Latino-owned firms.

They also face expansion challenges, since they are more likely to be sole proprietors with very few or no employees. The study revealed 91 percent of Latino-owned businesses in the region were non-employer firms. As a result, owners have less time to pursue business enrichment or to hire staff with specialized business functions, according to the report.

The average Latino firm in the Los Angeles region, the typical firm is actually one individual. They might hire people part time, but its one individual. Over fifty percent of the firms have one individual on their books full-time, and thats pretty striking. And so that just puts a greater, managerial burden and organizational kind of burden on that one individual, DeShazo said.

Technical and Banking Assistance Key to Growth

The study suggests technical assistant programs would be beneficial for growing Latino businesses. Programs teaching skills in areas such as marketing, business plan development, accounting, information technology and tax preparation could be best funded by public agencies, the study suggests.

The data that we were able to get and look at basically reported [Latino-owned businesses] asking for technical assistant at greater rates than any other minority-owned business. They want it. They know they need it. Its just an issue of getting it to them in a way that they can take advantage of, DeShazo said.

The study also reveals Latino businesses are underserved by banking institutions, despite the existence of outreach programs at some banks. Latino-owned businesses are also more personally vulnerable when making business investments.

Latino-owned firms use business savings accounts at relatively lower rates and finance their businesses based on home equity loans and personal credit cards. This has led to higher rates of foreclosure, declining home values, and higher credit card interest rates in the Latino community, causing them to be disproportionately impacted by the recession.

The study recommends banking institutions extend more short-term credit to Latino businesses. Stronger relationships between commercial banks and Latino businesses would benefit the regional economy, suggests DeShazo.

More Attention to Policy Issues Needed

There are in the report some policy areas that obviously need to be prioritized by groups like the LBC. Some of those are access to short-term credit in recession, credit card fair lending advocacy and very, very important, perhaps the most important one for the small business community is targeting and trying to prevent foreclosures for homes that are owned by small businesses. For every foreclosure on a business owner youll have a business failure in addition. That is very clear, DeShazo said.

Another area where policy advocacy is needed is in the public contracting sector. Latino businesses have a harder time getting contracts with government agencies, according to the report. Not only is certification an intensive process, many Latino businesses feel public agencies tend to stay within established networks to solicit bids for contracts.

Additionally, recent changes in policies have shut Latinos out of affirmative action programs in public contracting. For instance, Caltrans excluded Latinos from its dis-advantaged business enterprises program after it was hit with legal challenges and required to justify need for its race-based programs, even though, according to DeShazo, many Latino businesses still feel they face discrimination.

While Latino political engagement has increased over the last decade, Latinos have not done as much in advocating for its business community, according to DeShazo. The lack of time and resources, as well as the lack of access to business associations in the region may be factors in the current state of Latino business peoples civic engagement, he says.
One of the most important things we can do as an organization is policy advocacy, DeShazo said.

The report emphasizes advocating for policies that address the non-employer or self-employer status of many Latino businesses, or the needs of the fast-growing Latina women-owned businesses.

What we are doing is trying to develop a sense of what might Latino-owned businesses need, what their contributions to the regional economy are, and were doing this in an effort to give a voice to Latino businesses in greater Los Angeles, DeShazo said.

The Latino Business Chamber of Greater Los Angeles, LBC-GLA, a newly non-profit non-partisan organization, advocate for policies that address the needs of small businesses and work to increase the level of technical assistant programs.

The numbers are encouraging and the results of the study are in alignment with our mission to provide technical assistance, foster economic growth and produce the necessary economic structures and policy initiatives for empowering Latino businesses, Corralejo said.

For more information on the study or the Latino Business Chamber of Greater Los Angeles, LBC-GLA, visit www.LatinoBusinessChamber.com, or call (213) 347-0008.

Related Articles:

Bright Spots in the Economy: Hispanic Businesses

Feds Say They Want Stimulus Funds to Reach Minority-Owned Businesses

Study Identifies Aging Hispanic Workers as Invisible Boomers

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