PASADENA, CA (September 25, 2017) - More than 40 percent of the nearly 400,000 Latino-owned small businesses in the greater Los Angeles area have been denied capital because of low credit scores and other perceived risks, a new study reveals.
The report, “Fueling California’s Economic Growth: A Study on Latino Small Business and Capital Access” by the Small Business Finance Fund, defines the L.A. region to include Los Angeles, Long Beach and Santa Ana. But the statistics are reflective of the entire state.
Access to capital is important for all entrepreneurs, whether the funding is needed for a startup venture or to grow an existing business.
Small business lending by traditional financial institutions and household wealth contracted significantly in the wake of the Great Recession and access to capital remains problematic for all entrepreneurs, despite the economic recovery. But evidence shows that Latino small business owners are denied credit more often, charged higher interest rates and discouraged from applying for loans more often than their white counterparts, according to the report. That’s primarily because they tend to have lower credit scores, limited collateral and less startup capital.
And it has a ripple effect.
The lack of access to mainstream financial services and bank financing creates a financial disconnect, the report said, and it can be exacerbated by a lack of familiarity with the legal system, tax laws, local codes and standard accounting practices.
To read the entire article, click here.
