Exploring a Local Model for Building Latino-Owned Businesses

Latinos are starting small businesses at a faster rate than any other group, with a 44% growth in the number of businesses over the past 10 years compared with 4% for non-Latinos. Small business ownership could help narrow the racial wealth gap in this country, but starting a business is just the first step. 

What does it take to grow and maintain a sustainable business, one that generates wealth and not just income? The answer may be local.

At the Aspen Institute’s Latino Business & Entrepreneurship Summit 2022 on Oct. 18, Capital One hosted a session exploring a place-based small business investment model to build wealth and equity, using Richmond, VA–Capital One’s hometown–as a case study. 

To view the full session, click here.

“To support and advance small businesses, we have to take a place-based approach and learn about the local conditions,” said moderator Shena Ashley, President of Capital One’s Insights Center and Vice President of Community Impact and Investment. But lessons from a place-based approach can be relevant to help other cities.

“The Richmond experience is unique. But in so many ways, it’s just like Miami, El Paso, San Antonio… who are facing some of the same challenges and are looking to develop solutions around small business growth and development.”

Business ownership has the potential to help narrow the racial wealth gap 

A persistent wealth gap in America separates Latino families from white families: a typical (median) Hispanic family has $38,000 in wealth, compared with a typical white family with $184,000 in wealth. In other words, Hispanics have 21 cents for every dollar of white wealth. 

One reason for this gap is that Latino households are less likely to own a business than white households. Hispanics hold 8% of their assets in business and financial assets, compared with over 30% for white families. And a business can provide higher average returns than other assets, like a home. 

But Latino business owners, more than any other group, are optimistic that their businesses will generate enough wealth for retirement and to support future generations. Helping ensure that goal is achieved may begin to narrow the wealth gap. 

How Richmond supports Latino-owned businesses 

Latinos make up 7% of the population in Richmond, but represent a growing presence in the small business community. In 2018, the most recent year of data, Richmond was home to 5,300 businesses without paid employees and roughly 500 firms with paid employees, totalling 5% of the city’s business landscape.

“When I came to Richmond from Mexico, there was no Latino community,” said panelist Michel Zajur, CEO and Founder of the Virginia Hispanic Chamber. As the community grew over time, his family’s restaurant, La Siesta, became a gathering spot for Latino residents looking for advice and assistance. That demand led Zajur to start the Virginia Hispanic Chamber in 2000, with the goal of building economic bridges between Latino entrepreneurs and the community at large.

The chamber serves as the voice of Latino-owned businesses in Virginia. It offers supports and resources, such as helping entrepreneurs overcome language and cultural barriers, submit government contracts and bids, and elevate their web presence. The Virginia Hispanic Foundation, an affiliate of the chamber, works with public schools to help ensure the education of future entrepreneurs. 

Beyond the chamber, Richmond’s entrepreneurial ecosystem includes other community partners, including nonprofits, government, and private-sector actors. 

A key player in that ecosystem is the Federal Reserve Bank of Richmond, where panelist Carrie Cook serves as the Community Affairs Officer and Vice President of Community Development. 

“Richmond, not dissimilar to other communities, has an opportunity to do more for Latino small businesses,” Cook said. “I think what we’ll see moving ahead is greater ecosystem coordination: helping Latino small businesses get to the table, not just with each other, but with other ecosystem actors, with financial institutions, with community development partners.”

To help ensure that collaboration, the Richmond Fed brings these actors together, connects Latino small businesses to culturally competent technical assistance providers, and helps identify funding opportunities for small businesses to scale up. They also collect and provide data to understand what the small business community needs, identify innovative funding models, and offer training, such as racial equity capacity building and Community Reinvestment Act workshops for the banking community. 

As one of Richmond’s largest employers, Capital One invests in local small businesses through its 1717 Innovation Center, a business incubator focused on supporting communities of color, and through its Catapult program, which aims to help diverse businesses grow and potentially become future suppliers. Recognizing the importance of on-the-ground expertise, Capital One also partners with local startup accelerators like Startup Virginia and Lighthouse Labs.

“If you have government, local organizations, and affinity organizations all working together, I think you’re much more likely to achieve positive results,” said panelist Andy Navarrete, Capital One’s Executive Vice President and Head of External Affairs. “The Richmond community has matured to the point where these organizations and these entities are working in harmony. But there’s still a lot of opportunity to continue partnering in ways that could … drive small business incubation.”

Policy and program opportunities for Latino-owned small businesses 

Ensuring that this network of support is strong and aligned is especially important as small businesses continue to face economic uncertainty.

Cook noted that, nationwide, 44% of Latino-owned firms that applied for Paycheck Protection Program loans in 2021 received all of the funding that they requested. She sees this as a positive sign that small businesses are becoming more savvy at accessing funding and leveraging economic recovery supports.

Navarete highlighted the small business opportunities in the Inflation Reduction Act and within the Infrastructure Investment and Jobs Act – and how chambers of commerce, community organizations, and private companies can ensure that Latino entrepreneurs know about these opportunities and can take advantage of them. 

“They’re chock full of programs designed to incubate different businesses,” Navarete said. “Everything from installing EV chargers across the country to providing broadband access to traditionally underserved communities. All of these programs could massively benefit Latino small businesses, but they have to know these programs exist.” 

Up next

Capital One’s Insights Center has partnered with Boston Consulting Group (BCG) to measure the wealth creation potential of small business ownership and its capacity to address the racial wealth gap in Richmond. The study, which will be published in 2023, takes a place-based approach to identifying the unique gaps and opportunities in Richmond and will provide lessons for other cities across the country.

About the Capital One Insights Center

The Center combines Capital One research and partnerships to produce insights that advance equity and inclusion. As a nascent platform for data and dialogue, the Center strives to help changemakers create an inclusive society, build thriving communities and develop financial tools that enrich lives. The Center draws on Capital One’s deep market expertise and legacy of revolutionizing the credit system through the application of data, information and technology. 

Disclaimer 

This material has been prepared by the Capital One Insights Center, a non-partisan center for objective research and insights, and is provided solely for general information purposes. Unless otherwise specifically stated, any views, analysis or opinions expressed herein are solely those of the Capital One Insight Center’s staff, researchers and listed partners (if applicable) and may differ from the views and opinions expressed by Capital One Financial Corporation, other departments or divisions of Capital One Financial Corporation, or its affiliates and/or subsidiaries (Capital One). Information has been obtained from sources believed to be reliable. 

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