Celebrating Latinx Communities Means Investing in Latinx Businesses
“We sell Western boots, felt hats, and leather jackets for a good price and of good quality, made in our beloved Leon, Guanajuato, Mexico.”
“Vendemos botas vaqueras, chamarras de piel, y tejanas a buen precio y de buena calidad, hechos en nuestro querido León, Guanajuato, México.”
That was the phrase I shouted repeatedly (must have been over a thousand times) to attract customers to my Tio Manuel’s stand at the outdoor “remates”/swap meets throughout the rural towns in Fresno and Tulare counties in California. As we celebrate Latinx Heritage Month, I take a moment to recognize and celebrate the roughly 5 million Latinx small businesses, like my Tio Manuel, who are annually contributing $800 billion to the US economy (Small Business Administration).
My older sister Luz and I were in middle school when we started working for my Tio. He gave us our second job — our first was working in the fields with our family. We helped my Tio start his small business importing and selling Western apparel and footwear manufactured from Leon, Guanajuato. Like many immigrants speaking Spanish or an Indigenous language, starting a small business or startup in the United States, my Tio faced multiple barriers along the way, such as but not limited to, insufficient access to Spanish information on how to start a business, limited to no affordable and flexible capital, limited resources on how to write a business plan, how to register a business with the State of California, or even proper accounting. Despite these barriers, my Tio persevered and grew his small business.
When my Tio Manuel started his small business, he didn’t take a loan from a bank or Community Development Financial Institution (CDFI). There weren’t any of these lending institutions in our rural hometown, and he didn’t have access to information about the process and feared being in debt with a financial institution he didn’t trust or have a relationship with. As an alternative, my parents let my Tio borrow money to buy and import merchandise from Mexico to Fresno, California. By no means did my parents have extra cash to spare, though; we were a low-income farm-working family. My madre was frugal and savvy with our family’s finances, but she also believed in her brother’s dream. Additionally, my Tio worked out a payment plan with the owner of the small leather footwear and apparel factory in Leon, Guanajuato, Mexico. His friend eventually introduced Tio Manuel to a bookkeeper who spoke Spanish and helped him navigate the permitting process and explained step-by-step what documents he needed to start a business.
Much of this information is exactly what CDFIs were designed to provide, but again, there just weren’t any in his rural community. Without collateral or financial institutions to provide seed capital, like with many Latinx immigrant small businesses, family members provided Tio Manuel’s startup capital.
My Tio Manuel, as well as millions of Latinx small business owners, have contributed to the growing US economy since immigrating to the United States. If we want to really understand the magnitude of the economic impacts of the Latinx communities we could take the year 2019 for one example, where the economic output of Latinx people totaled $2.7 trillion. That is an impressive economic and financial contribution by an underrepresented demographic group that often is not highlighted or celebrated. Despite the challenges they face in starting businesses, they are still leading in stats when it comes to starting businesses compared to other demographic groups. According to a recent Bain & Co report, “50% of all net new small businesses created from 2007 to 2017 are Latino-owned.”
50% of all net new small businesses created from 2007 to 2017 are Latino-owned.
At Candide Group, we recognize the important contributions Latinx-owned small businesses play in moving our economies forward and generating local jobs that help build intergenerational wealth for the Latinx communities. That is why we have supported investments into companies like Bitwise, a Latinx-led company that provides opportunities in technology to the largely Latinx communities of Fresno, California. Additionally, through our Olamina Fund, we are going deeper with our investments to support Latinx-led CDFIs who are providing affordable and flexible capital to Latinx-owned small businesses. This work is critical in helping close the capital gap between BIPOC-led and white-led CDFIs. According to a HOPE Policy institute study on CDFIs, “in FY2017, white-owned awardees held $35.1 billion in assets, up from $4 billion in 2003, whereas minority-owned awardees held $5.7 billion in assets in 2017, up from $530 million in 2003.” This is of concern, and we are focusing on helping close this asset gap by investing capital resources to strengthen the ecosystem of Latinx-led CDFIs. These organizations have disproportionately powerful impacts because they lead important initiatives and change policies to move more catalytic government capital to Latinx-owned small businesses and homeowners.
For example, in 2021 we flowed $2 million in flexible, low-interested capital to The National Association for Latino Community Asset Builders* (NALCAB), a national membership organization and certified CDFI that advances economic mobility in Latinx communities. NALCAB’s members are Latinx-led community development corporations (CDCs), CDFIs, and other community-based organizations that serve tens of thousands of low- and moderate-income people annually through affordable housing, business lending, economic development strategies, and providing consumer financial education and wealth-building products and services. Furthermore, NALCAB was a principal architect in co-designing and co-launching the National Alliance of Latino CDFI Executives (NALCE), a newly formed initiative that brings together Latinx-led CDFIs to strategically deploy lending capital to underinvested Latinx communities.
Additionally, we are currently in due diligence to provide loan capital to an emerging, rural CDFI in California’s Central Valley that is serving immigrant and Latinx-owned small businesses. As an emerging CDFI and first-time loan fund that is women- and Latinx-led, attracting capital to support its loan program has been challenging.
Although we have made great progress in strategically and intentionally moving catalytic investments to Latinx-led CDFIs that are supporting small businesses, like my Tio Manuel’s, we still have a lot of work ahead of us to close the asset capital gap between Latinx-led CDFIs and white-led CDFIs. If we were to equitably invest in Latinx small businesses they could potentially generate, “an additional $2.3 trillion in total revenue each year, and 735,000 new businesses could be created supporting 6.6 million new jobs.” This could result in Latinx families increasing their wealth transfer to the next generation by $380 billion.
If Latinx companies had equitable investment, they would be generating an additional $2.3 trillion in revenue each year, with 6.6 million new jobs.
Let’s sit with that for a moment. That is a staggering amount of stagnant capital. Money is made to move, to flow, and this could provide Latinx families an opportunity to thrive and build financial health and stability by investing equitably in Latinx small businesses and communities.
When asked what fuels me to keep doing this transformative work in investments and finance, which can, at times, feel heavy and lonely, I pause to remember how challenging it was for my Tio to start his business but yet he never gave up… he kept going, no matter how tough and uncertain the road became. He couldn’t afford to give up. That is my motivation. Just like my parents believed in my Tio Manuel, I also believe in the millions of Latinx small businesses and entrepreneurs who are generating good quality jobs in their communities and investing in their families’ future and economic well-being. As Latinx Heritage Month comes to an end, I hope more capital providers will join us in committing catalytic funding to Latinx communities. Let’s continue celebrating and recognizing the ethnic, linguistic, cultural, and racial diversity within the Latinx communities as well as their incredible contributions and potential.
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*NALCAB is a borrower from Candide Group’s Olamina fund. You can view our past year of recommendations as a Registered Investment Advisor & accompanying disclosures here.
