As the nation’s businesses recover from the economic fallout of COVID-19, Hispanic entrepreneurs are steaming ahead. In fact, Latinos are kicking off businesses at a faster rate than any other group in the country, according to a recent report published by the Stanford Graduate School of Business.
Over the past decade, Latino-owned businesses have grown by 44 percent, while non-Latino start-ups have grown by just 4 percent. For Hispanic entrepreneurs looking to turn their dreams into a reality, this is promising news. Juan Hernandez, CEO and cofounder of Creser Capital, speaks to these entrepreneurs on a regular basis. His organization provides microloans and other support to small businesses throughout California’s Sonoma County. “Latinos represent 30 percent of Sonoma County, yet hold only one-eighth of the wealth,” Hernandez says. “They’ll be 60 percent of the county by 2060. And if they still hold one-eighth of the wealth, that’s a problem.”
Latinos at large are ready to solve that problem. But they have to start somewhere.
1. Plan, Plan, Plan
Just because you believe your business idea is great, that doesn’t mean everyone else would agree. Before you start a business, do some homework.
The US Small Business Administration (SBA) recommends you begin by conducting market research to understand consumer behavior and market trends in your industry. This will give you a pulse on what people want and what competitors are doing to meet that demand. The SBA website even offers some free market research and competitor analysis resources.
Once you’ve determined that your idea is a viable business concept, you can incorporate your research into your business plan. Your business plan is an evolving document that explains why your business rocks and tells investors how you plan to make it profitable.
Some people type out business plans in a Word doc, but others create a multimedia plan. The most effective approach would depend on your business model, but no matter what, your plan should include the following:
- An executive summary: this is where you present the strongest pitch for your business.
- A company description: explain the structure and purpose of your business.
- A market analysis: this is where you present your market research and competitive analysis.
- A product and service description: explain your products and services.
- Financials: in this section, you should include your expenses, revenue, debt, and other pertinent financial information. You should also detail any funding you have received thus far and/or make a request for funding that you need—and explain how you will make a profit off that funding.
Your business plan will help you keep the business on track, but it’ll also come in handy when you’re raising funds from investors, as it will clearly show how you plan to run a profitable business that would be worth their investment.
2. Secure Your Funds
For most Latino entrepreneurs, securing funding from traditional institutions is rarely an easy task. In fact, the Stanford study found that in 2021, only 46 percent of Latinos were approved for business loans by local banks as opposed to 66 percent for the white population.
However, the same study showed that 64 percent of Latinos were approved for funding by a nonprofit (by contrast, only 45 percent of white business owners were approved for that type of funding). Local nonprofits like Creser specialize in microloans. These are business loans, usually ranging up to $50,000, that are provided by SBA-approved lenders.
After you’ve developed your business plan and raised some funds, you may think it’s time to launch the business, whether at a physical location or somewhere in cyberspace.
But before you start making a penny, make sure you’re in the clear with Uncle Sam.
3. Fill Out Your Paperwork
Running a business in the US means operating under a spiderweb of rules and regulations imposed by the IRS and other regulatory bodies. Failure to follow the rules can lead to massive fines or even imprisonment. So, it’s important to cross your t’s and dot your i’s as soon as possible.
The tax documents and forms you’ll need will vary depending on your business, but here are some of the most common ones:
- Forms for structuring your business
- Employer Identification Number (EIN) forms
- Form 1099-MISC (If paying contractors or vendors)
4. Never Stop Improving
The work isn’t done once your business has launched—long-term success will depend on your ability (and your business’) to continue growing, improving, and adapting to the market.
Creser Capital raised more than $1 million and lent nearly $400,00 within a year of launching in 2020. Today, Hernandez says that figure is closer to $500,000. But the journey continues: Creser’s current endeavor is to get certified by the Community Development Financial Institution (CDFI) in order to attract more investors and gain the federal government’s seal of approval.
Hernandez calls the application process “a gauntlet” with “red tape” at every turn (Creser’s application was at one point dismissed because a board member who was working from home didn’t make note of the business address), but Hernandez says nothing will stop him from achieving this goal.
That determination stems in part from his belief that he’s part of a greater movement. “There’s no bigger opportunity for the US to grow than investing in the Latino community,” Hernandez says. “I think it’s going to save America.”