Despite thriving businesses, Latino business owners are underfunded by big banks. Photo credit: Daria Shevtsova / Pexels

A recent study by the Stanford Latino Entrepreneurship Initiative shows Latino-owned businesses are the fastest-growing small business segment in the country. While these businesses grew 25% in the last two years alone, numbers like that don’t always translate into access to capital.

“Latino-owned employer businesses are significantly less likely than white-owned employer businesses to have loan applications approved by national banks, despite reporting strong metrics on a variety of key lending criteria,” researchers found.

The study of more than 3,500 Latino-owned businesses revealed that only 20% of those applying for $100,000 or more in loans were approved. White-owned businesses, which grew 19% in the same timeframe, were able to obtain bank loans that large.

That disparity holds across loans of all sizes. The Stanford researchers found that 77% of white applicants had loans approved. For Latinos, that number drops to 51%. Researchers noted that over the last decade, the number of Latino businesses has grown 34%, compared to just 1% for businesses overall.

The study indicates that a lack of access to traditional bank financing puts Latino entrepreneurs at more personal financial risk than their white counterparts. Without bank loans, Latinos are more likely to finance via personal or business lines of credit, credit cards or home equity loans. 

Unfortunately, access to bank loans isn’t the only problem. While Latino communities have been disproportionately affected by the COVID-19 pandemic, Latinos have also been underrepresented when it comes to the U.S. government’s Paycheck Protection Program loans. 

The program began in the spring of 2020 in response to the pandemic, offering loans to businesses to cover expenses. Many small businesses faced significant challenges obtaining funding under the first round of PPP loans, and Latino-owned businesses largely missed out. In North and South Carolina, thousands of PPP loans were funded — just 65 of them were Latino-owned businesses. 

Jose Alvarez, North Carolina vice president of Prospera — a nonprofit dedicated to assisting Latino entrepreneurs — told Charlotte’s WCNC that Latino businesses “might not speak the language, they might not necessarily know what’s available to them, and much less during a pandemic.” 

The Associated Press analyzed data from the first PPP loans, noting that Latino businesses were some of the last to receive assistance and their applications had been “disadvantaged by the terms of the loans.” The latest round of PPP funding hopes to make up for the disparity by earmarking $12 billion for minority-owned businesses. 

As part of that earmarking process, the Small Business Administration will no longer encourage financial institutions to favor larger businesses. The SBA is now emphasizing businesses with 10 or fewer employees and businesses in lower-income areas. That shift is expected to help direct funds to smaller minority-owned businesses. 

The latest round of PPP loans also comes with new rules. The maximum amount was lowered to $2 million, and companies with more than 300 employees are no longer eligible. Under the terms of the PPP program, certain expenses including payroll, rent, and other costs are eligible for forgiveness.


Ray Aguilera (he/his) is a senior experimenter for Pulso based in San Francisco. He is a Mexican-American writer and editor with a career background in journalism and content strategy. An avid music fan, Ray broadcasts a weekly radio show on, a nonprofit internet radio station based in the Mission district of San Francisco.