People come to America from all over the world because it is the land of opportunity; they seek generational wealth for their families, many hoping to open their own businesses. Latinos, in particular, know that hard work and determination can bring great rewards in our country.
Small business growth is a critical ladder for economic mobility for Latinos in America. As we face continued economic uncertainty, more must be done to help foster greater opportunities for our communities. President Joe Biden’s recently released Fiscal Year (FY) 2024 budget proposal is a meaningful next step in ensuring we help Latinos to create more wealth in their local communities, but more must be done.
A recent NALCAB publication, the Latino Economic Agenda, makes clear that to continue to build upon the progress made, we must catalyze small business growth by increasing access to capital and business development services for underserved small business owners and entrepreneurs.
The good news is that President Biden’s economy has fostered a record number of entrepreneurs, with 10.5 million applying to start a new business. We are doing our part with nearly 5 million Latino-owned businesses in the United States. Amazingly, Latino-owned businesses contribute more than $800 billion to our economy annually.
President Biden’s recent FY 2024 budget proposal seeks to build on that record by growing regional economies, creating high-quality jobs nationwide, and supporting a skilled, diverse workforce.
The Budget also requests $4 billion in mandatory funding and $804 million in discretionary funding for the Economic Development Administration (EDA), the only federal agency with programs focused only on economic development. In addition, the President’s budget would invest $110 million in the Minority Business Development Agency. This much-needed infusion of capital will help minority-owned enterprises to build opportunity and narrow racial wealth gaps.
While all of this is encouraging, there are still persistent gaps in access to small, affordable loans for growing small businesses and startups. To seize these opportunities, entrepreneurs need investment options to start and scale businesses, yet we know that too many entrepreneurs cannot obtain affordable loans, particularly minority-owned businesses.
We must support mission-based lenders in increasing access to capital for those they serve – those overlooked by traditional banks. This means more business start-ups and businesses can expand, create more jobs, and fuel local economies.
We know that small minority-owned businesses are less likely to receive credit—as 41% of Black- and Hispanic-owned received none of the credit they sought, compared to 27% of White-owned businesses. To fix this problem, we must provide nonprofit lenders with permanent SBA programming—and enroll new, responsible mission-based lenders with proven capacity to reach traditionally underserved small borrowers.
The Biden-Harris Administration is proposing to help meet this need by lifting the moratorium on Small Business Lending Company (SBLC) licenses and creating a designation for new Mission-Based SBLCs. This will help meet a financing gap in underbanked communities and promote responsible small business lending through non-depository lenders by utilizing SBA loan guarantees to reduce lending risk.
Until now, these community lenders only participated in SBA’s flagship loan program under the temporary Community Advantage Pilot Program. While we continue to urge congress to codify the CA program - extending a permanent government guarantee to these lenders will provide certainty and grow this critical source of credit, as it will encourage current and new nonprofit lenders to be added. Currently, CA’s temporary status makes nonprofit lenders hesitant to invest in becoming certified or learning the specifics of the program’s parameters.
Our country needs greater small business creation from the Latino community. With the proper intervention, we can create more opportunities and continue to build from the bottom up and middle out. This is not just an issue with the Latino community; if we don't fix this imbalance, we will hamper our country's ability to fully build back economically.
Marla Bilonick is President & CEO of NALCAB