Hispanic-owned small businesses represent a vibrant and growing community in the US economy, but are finding it harder than others to get funding.

That’s the conclusion of not one but two pieces of research published by QuickBooks this year. And there's a lot that accountants can do to help in this area.

The most recent, out this week, found that three out of five Hispanic business owners say it’s a challenge for them to get funding right now, compared to less than 1 in 2 non-Hispanic business owners.

An earlier report, published in April, revealed that Hispanic-owned businesses were the most likely to have funding applications rejected by banks and other lenders during the COVID pandemic. The analysis excluded Paycheck Protection Program (PPP) loans and other government support.

Why funding is needed

In the April survey, almost 2 out of 5 (39%) of Hispanic-owned businesses said they need funding “to address immediate financial needs” rather than to plan for future growth.  

It’s very likely this need remains today. The latest research from QuickBooks revealed that more than two-thirds (69%) of Hispanic-owned businesses are currently experiencing cash flow problems. Unsurprisingly, the greatest problem they face is “adjusting the business to COVID.”

Addressing these challenges as the nation rebounds from the pandemic

could be the critical difference between failure and survival. This is especially true in the recreation, travel and tourism industries, which QuickBooks data shows to be the hardest hit. But even outside of these industries, Hispanic-owned businesses may be more vulnerable. They are typically younger than other businesses and potentially, therefore, less resilient. Almost 1 in 2 (49%) say their business is in the “early” stage of its lifecycle, compared to 1 in 3 (33%) of non-Hispanic business owners.

This may be because the business owners themselves are younger too. Reflecting broader demographic trends, more than a third (37%) are between the ages of 18 and 34.

What accountants can do to help

To get some answers, Jasen Stine, Intuit’s Education Leader, spoke to Alejandra Matias from Tax United. She/he recommends three things you can do for clients facing similar financial challenges:

 

1. Show your clients the importance of having up to date financial information for their business. Clients without real data around how much they earn and spend is critical to secure funding. This should be your #1 goal and commitment to these clients, not just for loans or things like that but also just to help them achieve their financial goals and potential.
   
   
2. Start by just teaching them foundational financial literacy. This includes how to read their financial statements so they fully understand these documents that you are sending them on a regular basis.
   
   
3. Offer them custom bundled services and subscription-based services that include more than just preparing a tax return and doing bookkeeping. It should include business advisory services that are proactive, forward thinking.

 

Tax and Accounting professionals are the most effective resource in helping your clients not just get funding for their business but also to help position them for future prosperity. Navigating financial health is critical to the success of the small business economy.