Starting a financial business is rewarding, at least that is what I thought when I first plan my business strategy. However, as I stepped into the business world, I realize the world does not work as plan. The market is competitive, most of us struggle in the real world, and networking plays a very important role.
In the US, where people come to pursue their dreams, one might think diversity base networking does not play a role, but the reality is far from it. Even in such a diverse culture, ethnicity, culture, race, and social status play an important role in business.
From opening doors due to social status to helping you move with affluent people, becoming a part of the majority always works in your favor.
As a Latino business owner, I notice odds were stack against me when I tried scaling my business. I was facing issues that my fellow business owners never complain about.
If you are also a Latino business owner or you are an aspiring entrepreneur, here are some of the financial challenges that you need to look out for.
Language Barriers
Now you might be thinking how language barriers can cause financial challenges.
Well, to answer this question, you need to understand where communication plays an important role in business.
From a business point of view, I notice how most brands were hiring Hispanic speakers for seamless communication. For instance, Cox is a US-base internet service provider with a dedicated Cox Servicio al Cliente, so the Hispanics can easily communicate and register their concerns. This makes a language barrier essentially non-existent, as customers can decide the language they want to communicate in.
On the contrary, Hispanic businesses generally do not hire communication experts, which keeps them at a disadvantage. For a business, language plays an equally important role, from seeking investment to pitching ideas or reaching investors.
While most Hispanic entrepreneurs feel they can communicate easily with native English speakers, keep in mind that basic communication is different from formal communication. While interviewing most of the financial experts, ask complex questions that an individual with limit language proficiency might struggle with.
Requir Collateral
While seeking business loans, banks, and investing companies generally require collateral from the borrower. This collateral can be an asset to match the overall worth of the loan.
Mostly, properties, vehicles, or jewelry are use as collateral for business loans. A report publish by the Stanford Business Survey suggests that Latinos are require to pay a much higher collateral compare to white business owners.
This highlights the notion that banks and financial institutions are under the assumption that Hispanics take riskier steps, have less experience in business, and have a much higher chance of failure.
Apart from this, the same study also explains that even if Latino people have a higher credit score, they are still able to acquire a smaller business loan than average. Overall, this shows that within the market, Hispanic business owners are not seen as trust business owners.
Funding Illiteracy
While there is no doubt Hispanics have lower access to funding, even with similar credentials, researchers are explaining another loophole.
Most Latino business owners resist seeking outside funding, restricting their business to stay small and limiting their chance of scaling. Apart from this, many Hispanics fail to explore funding options or stay hesitant to accept investments as well.
Also, Hispanic business owners prefer getting investment from outside sources i.e. venture capital or angel investment. These outside loan providers generally have a much higher interest rate, offer risky loans, and sometimes even offer less money with a much higher interest rate as well.
Traditional Identification
Seeking investment is quite a challenge and requires a very lengthy process. Most banks require a lot of data link with overall credit scores, tax details, overall earnings, dependents, details about business, and more.
This is a basic screening process that is use for all regardless of age, gender, ethnicity, or social class.
However, for Hispanic business owners, the process is slightly challenging, mainly because banks do not offer loans to business owners with Individual Taxpayer Identification Numbers (ITINs).
The ITNS is a tax process number that is offer by the IRS for people with no social security. Since most of the Hispanics are immigrants and do not have a social security number, they cannot seek business loans, unless they have a partner running a business with them who is a US resident.
This is the reason most Hispanics end up with bad loans, which can add to their financial burden.
Fear and Mistrust
All the conditions and issues list above highlight a lingering fear and mistrust between Hispanics and the government. Either most government officials scan Hispanic business owners at much harsher criteria, or they outright deny them financial aid.
This mistrust is mainly root in the ethnic divide between different communities. Most of the white business owners do not trust the Hispanics with business as they are racially profile. Similarly, most of the Hispanics do not want to include whites as business partners.
Hispanics fear being taken advantage of, as they feel less connect to the community. On the contrary, the white community feels hostility toward Hispanics as they see them as people who are not very well verse in running businesses.
