Funding Constraints for Latino Business Start-Ups

Abstract

This study focusses on the high growth of Latino-owned businesses (LOBs) in the United States during the last two decades and the constraints these businesses face during their start-up and development stages. During this period, the number of LOBs increased faster than businesses owned by other racial and ethnic groups. The study also addresses the following aspects of Latino business ownership: 1) the main reasons U.S. Latinos decide to become business owners; 2) their reluctance to seek loans from formal financial markets; 3) internal and external factors that limit Latino business owner participation in financial markets, 4) and the internal and external factors that banks and other financial institutions face when working with Latino businesspeople. We found important gaps in access to credit between LOBs and two comparison groups: i) Equally-Latino & non-Latino firms and ii) White-owned businesses.