Access to capital continues to be the most critical problem every business owner hoping to expand their business faces. Being a woman in business, especially a Latino female, complicates things further. Did you know Latino women-owned businesses grew 87 percent between 2005 and 2007? Most Latino-owned firms stay small, however, with only 2 percent raking in more than $1 million in annual revenue. Why do they stay small? The answer is limited access to capital. Are you a female entrepreneur? Camino Financial provides a great resource for business loans for women.
Latino Businesses Contributed $71 Billion to the Economy in 2014
Limited access to capital explains why Latino-owned businesses don’t grow as much as they otherwise would. In 2017, 14 percent of Black-owned firms with more than one employee received loans from banks. Asian-owned businesses did even better, with 15 percent of them getting bank loans. In comparison, banks helped only 12 percent of Latino businesses. It looks bad.
The good news is, however, that banks are not the only sources of business capital. Are you a female entrepreneur? Here are two sources of capital you might not have seriously thought of:
Family and Friends
Anyone who has tried raising capital from family or friends knows it’s hard. The problem is that those people are not as passionate about your idea as you are. Others may hate taking risks. They fear you might fail, losing their money. Professional investors are a better option, right?
Professional investors strangers are even more skeptical than family and friends. An investor asks themselves: if this person’s family won’t trust them, why should I?
So, explain your idea to your friends or family logically. Explain your idea in the simplest way possible. Tell them you’ve done your homework. Let them know you have a few customers lined up to buy your product. Show them your prototype. Professional investors are more likely to fork over money if they’re not the only ones in the game.
Borrowing from family and friends comes with various benefits. First, these dear ones might agree to a more flexible repayment plan than other lenders. Second, you’ll likely enjoy lower interest rates. Third, a bad credit history rarely stands in the way but if you have a bad credit history consider bad credit business loans if your family and friends aren’t so giving. Finally, they probably won’t ask for collateral. However, you need to protect your loved ones. Be sure to have the loan agreement in writing.
Individual Angel Investors
An angel investor is a high net worth individual looking to invest some spare cash. Typically, angles seek returns hovering around 25 percent. Angel investors give you money for an equity position in your business. Often, these investors need you to involve them while making business decisions. If you plan to sell the company in the future, realize that angels must get a share of the profit.
“Angel loans” are typically safer than bank loans. Usually, you don’t have to repay the debt if the business collapses.
Where do I find angel investors? Start with family and friends. While at it, be upfront with them. Word of mouth also works. You may also want to join your local Chamber of Commerce if you haven’t yet. Some of the members might be angel investors. AngelList is also a great place to start your search.
Online Lenders: They can be a Great Option
Your bank won’t approve you. Family and friends have failed you. And you can’t find angel investors. What do you do? Give up and go home? Giving up is rarely an option for a determined business person like you ever considers.
Online lenders tend to be somewhat lenient compared to traditional banks. Some online lenders will support you even if your credit score looks terrible. The application process is quick and efficient. Overall, online borrowing is a lot less stressful than either bank or credit union borrowing. Whether you want a line of credit, a long-term loan, a short-term loan, or invoice financing, the best online lender has you covered. Are you a woman entrepreneur? Check out these small business loans for women.
Conclusion
Being a Latino business person can be hard. It gets worse if you’re female. It brings you face-to-face with challenges that hit you harder than they do those in other ethnic groups. Getting a bank loan, for example, might prove to be harder for you than it is for others. Luckily, bank loans aren’t the only option out there. Here are small business loans for women you may consider.