Thought Leadership: Despite growing economic influence, Hispanics remain financially underserved

This opinion piece was originally published on NJ.Com.

By Arturo E. Osorio

The US Census reported that 18.7% of the U.S. population was Hispanic as of April 1, 2020. In New Jersey, recent estimates suggest that about 20.4% (nearly 1.8 million) are Hispanic, which ranks the state seventh among the top ten states with the largest Hispanic/Latino population in the nation.

As reported by the New Jersey Statewide Hispanic Chamber of Commerce (NJ-SHCC), the Garden State is home to over 120,000 Hispanic-owned businesses, which in turn create thousands of jobs and tens of billions of dollars in tax revenues – an essential component to funding municipal services and shoring up social programs like Medicare and Social Security.

In 2018, the Gross Domestic Product of this Hispanic community in New Jersey was $97 billion, larger than the entire economic output of the state of Hawaii. In all, Hispanics in New Jersey represent about 14% of all small business owners and 20% of the local workforce.

Despite these numbers, Hispanics are still a financially underserved population. A recent Stanford’s report found that only 20% of Latino-owned businesses that applied for national bank loans over $100,000 obtained funding, compared to 50% of their white-owned business peers.

When looking at loans of all sizes, the percentages changed, but not the financial service gap: among Latinos, 51% received loans versus 77% for whites. Echoing these numbers, a 2020 research analysis by the U.S. Small Business Administration (SBA) Office of Advocacy found that businesses owned by Hispanics were more likely than those owned by Whites to have their loan application denied outright.

This reported data included all funding sources and was not solely focused on SBA initiatives. Considering business education in general, critical financial tasks such as invoicing, getting paid, paying bills, and managing taxes were reported to be a challenge for almost 74% of Hispanic-owned businesses.

Read the full collection of reflections from Rutgers professors produced by Rutgers University Communications to mark Hispanic Heritage Month.

A recent analysis by QuickBooks, (the bookkeeping software company), found that more than 21% of Hispanic business owners describe these regular business tasks as “extremely challenging.” Yet, despite all these challenges, Hispanics are more likely to own a business than the rest of the U.S. population.

This tenacity and growth are supported by a noticeable increase in education within the Hispanic community. Multiple programs targeting Hispanic business owners have emerged throughout the state. Programs like the Hispanic Entrepreneurship Training Program (HETP) sponsored by PSE&G, the Latinas Entrepreneurship Series (LETS) – both offered by NJ-SHCC – or the Black and Latino in Tech Initiative at Rutgers-Newark, or the outreach efforts with bilingual staff by NJ-Small Business Development Centers (NJ-SBDC) are some examples of these efforts.

Beyond business training, access to higher education has also played an important role in the Hispanic community’s positive impact. The number of Latinos enrolled in college has increased from 2.9 million to 3.6 million during the 2010 to 2019 period. This educational attainment among Hispanics has been led by women. In 2019, 56% of Hispanic college students were women, while only 44% were men.

The Hispanic community is an intrinsic part of the United States. Through their businesses, they provide local access to products and services enriching the local quality of life of towns all over. As individuals, Hispanics are qualified members of the community driving innovation and supporting new ventures.

Arturo E. Osorio is an associate professor at Rutgers Business School. He conducts research on entrepreneurial actions and consequences in urban communities, socioeconomic development systems and processes, and food security.