Hello Latino Entrepreneurs! Are you a business owner looking to access working capital for your small business? We understand that starting and growing a business it’s difficult for everyone. But it can be particularly complicated for Hispanic and Latino entrepreneurs. We’re here to support every Latino business out there! We will explain funding options that the Latino community can apply to 2022.
Challenges as a Latino Entrepreneur.
You must know that in any case obtaining business capital will depend on your finances and your ability to navigate the legalities and requirements associated with it. Traditional funding options such as small business loans, credit cards, and lines of credit aren’t easy to obtain. And as a new business owner, you may face even stricter requirements.
The truth is. We know the challenges you’ve dealt with as a Latino business owner. Language barriers and discrimination when trying to access financing are common ones. Statistics have proven there is an existing gap in access to business funding. A Stanford business study showed that in 2019 when Latinos applied for financing:
"A 28% of Latino business owners end up with full funding". This compared with 48% of white business owners.
Despite the funding gaps, we must recognize the importance of Latino entrepreneurs to the economy. In just the past 10 years, Latino entrepreneurs have started small businesses at a higher rate than any other demographic, all while facing financial challenges.
We are not saying this to discourage you. On the contrary, we believe every entrepreneur should have the same possibilities and access to resources.
About immigration status and access to business funding.
The legal requirements for access to financing vary according to your immigration status:
If you are a naturalized citizen, you will rarely be confronted with special restrictions or requirements to qualify for a Small Business Administration (SBA) loan or a traditional bank loan. If you meet the qualifications, you should be approved.
If you have a Permanent Residency (Green Card), you are also eligible for government loans such as an SBA loan, and if you can meet loan requirements should be approved for traditional bank loans.
If you are officially a resident but don’t have your green card yet, government lenders such as the SBA and some banks will accept your valid immigrant visa, with a U.S. Customs and Border Protection stamp, as proof of your status.
If you have a working visa but do not have permanent resident status, you may still be able to qualify for a small business loan from the SBA or a short-term loan from a bank.
If you have sought asylum or have refugee status and are a lawful permanent resident, you may qualify for an SBA loan or traditional bank loan.
If you are undocumented, you will not be qualifying for government or bank loans. In this case, you may find assistance through community programs, local support networks, or other venues.
Business funding options for Latino entrepreneurs.
Now, let’s have a look at several alternative funding options that do not require a lot of documentation, or have a great credit history.
1. Community-based nonprofit groups.
These funders offer loans that meet their mission statement, helping people who may be underserved by traditional business financing to access business funding. They have flexible financial qualification requirements, and typically low – or no – interest rates. You will likely need to meet a specific set of requirements such as age, background, experience, or achievements and there may be restrictions on how you can utilize the funding. There are often many applicants for a limited pool of money, and you may have to prepare a business plan, proposal, and other documentation explaining why you should be chosen.
Micro-loans are offered by nonprofit organizations, government agencies, or community-based investments. There are often restrictions on how you can use these loans:
○ Working capital and business growth are allowed.
○ Repaying existing debt or buying real estate is often prohibited.
Eligibility requirements for micro-loans, tend to be less strict than those required for a traditional bank loan. The borrower doesn’t have to worry about putting up collateral. Micro-loans are a good option for businesses that don’t have great credit. You can borrow up to $50,000 to start or grow a business.
Taking on debt isn’t the only way to raise capital. Crowdfunding serves as a viable alternative to traditional loans. When crowdfunding, businesses accept small investments from their customers until they reach a specific financial milestone. In return for their investment, customers will typically receive special perks such as significant discounts or free products.
Crowdfunding is not only a great way to raise capital without getting into debt, but it also allows you to raise funds quickly. Look at platforms like Kickstarter but be aware that you are essentially making it easy for family, friends, and fans to loan you small amounts of money. If you don’t have that sort of social circle, crowdfunding is unlikely to work for you.
4. Peer-to-peer lending.
This option connects small businesses with funders that include individual investors and institutional investment groups such as hedge funds or investment banks. Depending on the platform, peer-to-peer can provide an excellent way for small businesses with solid credit histories to access funding. Consider that you typically need to have a strong credit rating, where the 700+ range is preferred.
5. Merchant Cash Advances.
If you are already in business – even for just a few months – and have steady revenues but your credit history isn’t great, a Merchant Cash Advance (MCA funding) may be the best option for you. MCA funding focuses primarily on your incoming revenue. Business owners with past bankruptcies or low FICO scores can still be approved.
When it comes to paying back to the lender, a predetermined percentage will automatically be deducted from your daily sales until the debt has been paid. To qualify for an MCA, you will need to have a business bank account. Also, you'll have to meet some requirements regarding monthly business revenues. You may qualify if you’ve been in business for at least three months and make about $7,500 monthly. The application process for MCA funding is typically easy and can be done online. Learn more about the Tax Benefits of Merchant Cash Advances!
Access Business Funding Faster.
The main question here is how do you find a trustworthy funding source that adjusts to your business needs? One easy way is to talk to One Park Financial. Fill in the pre-qualification form – it's super easy, fast, and private.
Once you are pre-qualified, you'll get access to a funding expert who can discuss your business needs and options to determine what funding type works for you and your business. One Park Financial will then work with its network of funding partners to find you an offer.