Cristina Shapiro is Vice President at Goldman Sachs. She agreed to answer a few questions after attending The Aspen Institute Forum on Latino Business Growth, a three-day convening held by the Aspen Institute Latinos and Society Program.
What do you feel is missing from the current funding streams available to Latinos looking to scale their businesses?
Most business owners still approach banks as the primary source for capital, but those funding sources have two primary issues. First, they gravitate towards larger loan sizes, and second, they rely primarily on the credit of the owner(s), collateral, and stable cash flows. Latino businesses are smaller than non-Latino businesses, naturally subject to more variability in cash flow, and often more limited collateral. Funding sources need to be willing to underwrite smaller loan sizes, look at complements to FICO such as rent or utility reporting, and reach into Latino communities to inform prospective clients of the benefits of external funding sources.
What’s at stake if we don’t develop solutions for scaling Latino-owned businesses? Why is this topic important for American prosperity?
If we look beyond the glaring opportunity cost of not scaling Latino owned businesses, which adds up to $1.4 trillion, keeping those companies small results in limited economic prosperity for what will soon be 30 percent of the population of our country at time when real wages are going down and entrepreneurship is increasingly a more viable way to sustain individuals and families. It will mean the loss of community anchors that employ other Latinos, and the loss of diverse financing opportunities for banks and non-bank financial institutions as those companies grow (i.e. lost investment management services, savings or 401K accounts, and eventually capital market transactions). Inaction will result in a curtailed customer pipeline for lenders and investors.
How will you move forward and implement what you learned from the forum in your own field of work?
The forum brought to light the acute intentionality that must be present as we seek to address financial health and financial justice for minorities and non-minorities. In my field, I will seek out opportunities to ensure Latino-owned businesses are aware of and benefiting from the Goldman Sachs 10,000 Small Businesses program, where graduates have been successfully increasing revenue and creating jobs at a rate that outpaces the national average. I will seek out financing opportunities that advance the potential of all Latino small businesses, and I will proactively educate/inform others about the opportunity cost of not growing Latino-owned businesses.
What did you learn from the forum that surprised you or challenged your previously held opinion?
Thanks to the Stanford Latino Entrepreneurship Initiative report I learned that Latino-owned businesses are not disproportionally in industries that are lower growth or lower scale than non-Latino businesses, nor do they target Latino customers primarily. These businesses are in industries and in business lines that have the potential to scale like their non-Latino counterparts. That is great news! However, they need access to networks, influencers, capital, and a better branding narrative. The fragmentation in efforts by different Latino-based groups has held back the Latino business community from being as effective as they can in raising awareness of their potential and securing champions for their success.
We’ve seen how important it is to promote understanding of how the success of the American Latino community, and the success of this nation, are deeply intertwined. One way is through Latino economic advancement. How do you maintain momentum in promoting this understanding?
Momentum will be maintained through data and a focused narrative. On the data front, forum participants need to remain up to date with statistics and issues regarding Latino-owned businesses to continuously share that learning with key stakeholders. It is hard to promote understanding without facts. On the narrative front, scaling these firms shouldn’t be about helping an “underserved” segment of the business population. Instead it must continue to be framed as a core component of achieving economic growth.
This is the third in a series of posts on the Aspen Institute Forum on Latino Business Growth. Participants from local and national economic and enterprise development and support organizations, Latino business owners, financial institutions, philanthropy, government and academia will share their perspectives on the challenges and solutions to scaling Latino-owned businesses.