All CEOs face tremendous odds when it comes to finding growth capital. Hispanic CEOs face additional difficulties in confronting this basic entrepreneurial challenge, according to research studies. But despite the odds, savvy entrepreneurs can find the risk capital they need to grow, as shown by an analysis of the Hispanic Business 500®.
To examine the capital-access issue, Hispanic Business mined its database of the largest Hispanic-owned companies in the nation. Data culled from the 2002 Hispanic Business 500 reveal an overwhelming dependency on commercial bank loans for funds. Only 23 companies among the 500 reported less-conventional financing structures such as private placement, venture capital, or publicly traded equity. These 23 hardy Captains of Capital, listed in the accompanying directory, serve as role models for Hispanic firms seeking growth financing.
Together, the Captains of Capital report annual revenue growth of 11.12 percent – slightly more than the figure for the Hispanic Business 500 as a whole (10.88 percent) – but they tend to be concentrated in dynamic, fast-growth-potential sectors, such as technology, financial services, real estate, and construction. A high percentage of these companies report having a written business plan (88 percent) and company financial plan (80 percent). Surprisingly, the Captains of Capital have a profit breakdown similar to that of the Hispanic Business 500 as a whole. It isn't superior size or bottom-line performance that sets these companies apart, but their financial sophistication and assertiveness in exploring their options.
"There are different stages a company can grow to in terms of capital," says Jesse Garza, a former SmithBarney executive and now CEO of the investment consultancy J. Garza & Co. in San Antonio. When they're just starting out, they go for the three Fs – family, friends, and fools. They're going to ask anybody on the street who's willing to listen. [Later,] when entrepreneurs have a local business idea that begins to appeal outside their local market, they graduate to a different level. We could go after angel investors, choose the venture capital route, or go public, which I would say is the last and highest point of entry [into the capital markets]."
Overall, the Hispanic Business 500 companies, like most other Hispanic firms and indeed the entire U.S. small-business economy, depend on the commercial bank system for working and growth capital. According to the Small Business Administration (SBA) report "Financial Services Used by Small Businesses," 85.2 percent of Hispanic firms use commercial bank loans, compared with a national average of 88.9 percent. Among the Hispanic Business 500 companies, 78.3 percent report using commercial loans (see table, "The 500's Funding").
|CAPTAINS OF CAPITAL|
|Rank||Company & location||2001 revenue ($M)||Type of business||Type of financing*|
|1||MasTec Inc., Miami, FL||$1,220.00||Telecomm infrastructure svcs.||PO, CL|
|2||Codina Group Inc., Coral Gables, FL||$783.00||Commercial real estate||CL, PP|
|3||The Related Group of Florida, Miami, FL||$547.00||Real estate development||CL, VC|
|4||Physicians Healthcare Plans Inc., Tampa, FL||$260.00||Real Managed healthcare svcs.||PP|
|5||UniBoring Co., Howell, MI||$170.00||Automotive powertrain mfg.||CL, PP|
|6||TELACU Industries, Los Angeles, CA||$100.00||Economic devel., financial svcs.||CL, VC|
|7||Somerset Capital Group Ltd., Bridgeport, CT||$90.20||Capital & high tech equip. leasing||CL, VC, PS|
|8||PCNet Inc., Trumbull, CT||$61.00||Network sys. intgr. mfg.||CL, PBL, CC, PS, PP|
|9||Love Chrysler Inc., Corpus Christi, TX||$55.80||Automotive sales & svcs.||CL, VC, PS|
|10||Caribe Homes, Miami, FL||$54.00||Land devel. & home bldg.||CL, PP|
|11||S3 Ltd., Virginia Beach, VA||$45.80||Outsourcing, privatization, partnering||CL, PBL, CC, VC, PS|
|12||UniBank, Miami, FL||$31.32||Banking products & svcs.||VC|
|13||Sterling Financial Group, Boca Raton, FL||$17.50||Financial svcs.||PP, VC|
|14||Tarafa, Coral Gables, FL||$15.20||Govt. & institutional contracting||CL, VC|
|15||Supply Source, Williamsport, PA||$12.01||Office design & furniture whsl.||CL, PP|
|16||Robert E. Rivera Const. Inc., Santa Rosa, NM||$9.33||General contracting||VC, PS|
|17||J. Torres & Co., Bakersfield, CA||$9.21||Trucking, envir. & recycling svcs.||CL, PBL, CC, PP|
|18||Dialtone Internet Inc., Fort Lauderdale, FL||$8.70||Managed hosting, IBM e-servers||CL, CC, PBL, VC|
|19||Elf Corp., Longwood, FL||$7.43||Wholesale dist. pet products||PP|
|20||American Remedial Tech., Lynwood, CA||$7.42||Environ. remediation svcs.||CL, CC, VC|
|21||Service Electric Co. Inc., Albuquerque, NM||$6.85||Elect. contracting||PP|
|22||Mir Fox & Rodriguez, Houston, TX||$6.30||CAP & consulting||CL, CC, VC|
|23||Paquito & Sons Inc., Rockledge, FL||$5.20||Audio/video design install. svcs.||CL, VC|
|*Key: CC = credit card(s); CL = commercial loan(s); PBL = personal bank loan(s); PO = public offering; PP = private placement; PS = personal savings; VC = venture capital.|
|© 2003 Hispanic Business Inc. Reprinting, copying, or transmitting all or part of this information requires written permission.|