Entrepreneurship and the Hispanic Community. Javier Palomarez President & CEO U.S. Hispanic Chamber of Commerce

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1 Entrepreneurship and the Hispanic Community Javier Palomarez President & CEO U.S. Hispanic Chamber of Commerce

2 Entrepreneurship and the Hispanic Community: Challenges Access to capital is the greatest challenge our entrepreneurs face Tighter bank underwriting standards and resource constraints on lending are top reasons why the supply of credit to our businesses has been stifled Both issues were highlighted by the results of the Federal Reserve System Series regarding small business financing

3 Overview of the Hispanic Community Cuba 1,820,000 4% Dominican Republic 1,365,000 3% Other 1,820,000 4% Hispanics now largest ethnic group, representing 15% of total population Puerto Rico 3,640,000 8% Central America 4,095,000 9% Source: 2000 US Census Bureau South America 2,275,000 5% Mexico 30,485,000 67% Mexico Central America Puerto Rico South America Cuba Dominican Republic Other Hispanic population growth outpacing general market at rate of 3 to 1 Easily targeted due to geographic concentration, common religion and language

4 Population Growth Coming From Hispanics WA 21% OR 22% ID 23% NV 58% CA 63% AZ 56% NM 68% KS 30% OK 19% TX 56% IA 16% MO 10% AR 7% IL 72% TN 4% VA 17% NC 5% SC GA4% 7% FL 41% MD 4.3% DC 30% 60% of the growth in key states over the next 10 years will come from Hispanics Half of U.S. foreign-born residents are Hispanic

5 Hispanics Concentrated in Key Regions Los Angeles MSA Hispanics = 48.1% of population IL 15% Mexican Miami DMA Hispanics = 49.2% of population Puerto Rican Cuban Dominican Central American: South American: Mexican Puerto Rican Cuban Dominican Central American: South American: CA 36% AZ: 30% NM: 44% NYC MSA Hispanics = 21.1% of population Mexican TX 36% Puerto Rican Cuban Dominican Central American: South American: FL 20% NY/NJ: 32% Source: 2000 Census.

6 Small Businesses in the United States Large Business 92% of Top 50 require suppliers to report diversity metrics in their RFPs Small Business 64% of all jobs in America generated by small businesses 10.4 Million WM owned companies 1.5 Million LGBT owned companies $2.2 Trillion Revenue 2.8 Million Hispanic owned companies

7 Challenge: Tighter Bank Underwriting Standards Additional collateral requirements by banks and more frequent re-evaluation of assets (personal and business) by banks of the small businesses Greater focus on the cash flow of the small business (new post-recession focus) o Hispanic businesses not suffering from bad credit, as much as no credit

8 Challenge: Tighter Bank Underwriting Standards Higher personal credit thresholds, including credit scores o Particularly challenging for those recently arrived in the U.S. Local chambers report seeing many new entrepreneurs struggling to start up businesses because they cannot secure enough collateral for a loan

9 Wealth Breakdown of Hispanics Hispanic Family Income Levels 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% $20-$29K $30-$39K $40-$49K $50-$59K $60-$74K $75-$99K $100K+ 2.0% 0.0% $20-$29K $30-$39K $40-$49K $50-$59K $60-$74K $75-$99K $100K+ 36.4% of Hispanic families make more than $50k 18.1% of Hispanic families have income of $75K+ 9.3% of Hispanics make more than $100k Source: U.S. Census Bureau

10 Purchasing Power of Hispanics $1,200 $1,000 $800 $600 $400 $200 $0 CA:24% +31% IL: 4% NY/NJ: 13% Projected Hispanic Purchasing Power ($ Billions) 47% of Hispanic purchase power and 50% of Hispanic population is concentrated in Texas and California AZ: 3% NM: 2% TX:18 % FL:8% Source: 2006 Census / Selig Center for Economic Growth Top 8 states account for more than 70% of total wealth

11 Challenge: Tighter Bank Underwriting Standards Without a streamlined process, our businesses are struggling to stay current with regulatory changes & new programs o Example: 7(a) loan guarantee program great program for our businesses, but in part, due to uncertainty in duration, banks have been reluctant to invest in our new businesses Not enough lending options Only a handful of CDFIs available to service the Hispanic community

12 Suggestions & Solutions: Alternative Methods of Access to Capital Additional CDFIs needed to serve the Hispanic business community Passage of the Small Business Lending Fund Act (pending in Small Business Jobs Bill) should expand availability of credit to small and community banks to facilitate lending to new businesses Expand availability of microfinance loans by smaller and community banks. Local chambers report seeing an increase in these types of loans to start-up businesses