Hispanic-owned businesses could represent ‘unrealized potential’ for Idaho’s economy  

Hispanic buying power increased by 65% between 2010 and 2020, according to the Idaho Department of Labor, and the Hispanic market share of consumer spending is projected to increase 42% from $6.4 million in 2020 to $9.1 million by 2025. According to the Small Business Administration’s (SBA’s) 2022 Idaho Small Business Profile, Hispanic individuals make up 12.2% of workers and owned 6% of businesses. Despite this growth, Hispanic small business owners face unique challenges, and Adam Velasquez, private banking relationship manager, has firsthand experience both professionally and personally — being Hispanic and growing up in eastern Idaho.  

“When a Hispanic-owned business hits a plateau, it has a trickle effect on the economy,” Velasquez said. “(That could) cause unemployment, lost tax contributions to the state and a loss to businesses that supply or are supplied by Hispanic-owned businesses.”

With an Aspen Institute report stating there is a $1.38 trillion “opportunity gap” that represents the unrealized earning potential of Hispanic-owned companies, “I have no doubt that would make a huge difference to Idaho’s economy,” Velasquez added. 

These upcoming days signal National Hispanic Heritage Month (Sept. 15 to Oct. 15) of 2022 is coming to a close. Velasquez and others have taken the opportunity to recognize the contributions Hispanic business owners make to their communities and beyond, and Velasquez shared that he feels the following barriers need to be overcome to help Hispanic businesses thrive in the Gem State: 

• Funding gaps. One study found that, in contrast to 50% of white-owned businesses, just 20% of Latino-owned businesses seeking national bank loans above $100,000 had their requests accepted. 
• Low average credit score. NerdWallet reports that Latino-owned businesses typically have an average credit score of around 614, which makes it difficult to qualify for traditional lending.

Velasquez also explained that, sometimes, Hispanic and Latino(a) business owners hesitate to even apply for loans. 

“(Some) are debt averse; they don’t like the idea of large loans out there,” Velasquez said. “Most are going to lean on angel investors.”  

He added that some research has found that Hispanic individuals tend to start a business with less money, and because of that they rely more on personal wealth to launch the venture. And once they start making more money, they put it back into the business while living on low capital themselves.  

“Due to the disparity of having less money down, many of those Hispanic business owners have less collateral to pledge to a bank loan for equipment, working capital, etc.,” Velasquez explained. “So that’s why it’s important for a lender to understand their business, how it works, what is needed to succeed, the ability to repay the loan, that could be a huge game changer for these small businesses.” 

For Hispanic current and potentially future business owners, Velasquez recommends considering an SBA loan, which will “guarantee some of that lending risk to the lender,” and this loan could be used to secure real estate, inventory and more. 

He described the interest rate as being reasonable, and there could be longer repayment terms. And even though such an SBA lender is likely to work with people not having traditional credit, there is still a credit threshold. 

Velasquez also pointed out: 

• Language barriers. Some financial institutions don’t offer language assistance to help Hispanic business owners who don’t speak English. 
• Unawareness of viable funding sources. Many Hispanic entrepreneurs are unaware of special lending programs designed with their needs in mind, such as the Small Business Diversity Banking program offered through Velasquez’s bank. It was created to make capital available to underrepresented businesses under Special Purpose underwriting guidelines, a way of “leveling the playing field.”

When asked what Idaho could do better, Velasquez suggested increasing mentorship opportunities. 

“For me personally, growing up, while I never tried to open a business, there weren’t a ton (of potential mentors) in my circle, who were physicians, attorneys…someone I could look to and say, ‘I could do that,’” Velasquez said. “Luckily, I did find some mentors, but I can’t say the same for others.” 

That mentorship, Velasquez described, could be for sharing what grants or programs are available for getting a business started or possibly how to scale an existing business. 

“My plea to business owners across the state is, if you have relevant experience, knowledge, applications to business owners, there’s programs that are looking for mentors,” Velasquez said. “Maybe they’ve made a business succeed and maybe they want to give back because they had mentor or they’re good at what do and want spread wealth; for new Hispanic business owner, that’s an invaluable resource.” 

Velasquez also had a recommendation for any business owner: tailor to the Hispanic community, including by potentially replicating resources such as bi-lingual employees and offering services in English and Spanish. 

“That’s a huge drive for those businesses and are good for any growing business,” Velasquez said. “People are going to gravitate to those businesses.”