There is a new bright spot shining on the U.S. economy today, and it is originating from a surprising source -- Hispanic entrepreneurs.
PNC Bank reports in its first survey focusing exclusively on Hispanic entrepreneurs nine out of 10 respondents feel positive about their own economic prospects over the next two years, even as they remain cautious about the strength of the overall U.S. economy.
Steven Daboub, vice president of corporate banking at PNC, told HispanicBusiness.com that the survey was conducted to better serve business owners in Florida, Chicago, New Jersey, the District of Columbia, Atlanta and North Carolina.
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Daboub acknowledged that the survey oversampled the state of Florida and the Chicago metropolitan area, with an emphasis on respondents in the service industry (Florida) and retail sector in the city of Chicago. He points out, however, that it is the first survey the Pittsburgh-based bank has conducted that focuses exclusively on Hispanic small-business owners.
"It was encouraging to see the level of optimism within the Hispanic business community," Daboub says.
The survey, released earlier this week in recognition of Hispanic Heritage Month from Sept. 15-Oct. 15, reveals interesting details about Hispanic family-owned small businesses. Key among the findings -- 69 percent of Hispanic enterprise owners have high expectations for strong sales and performance results heading into 2013, even though a sizeable number (23 percent) feel pessimistic about their local and state economic conditions and the broader national economy (31 percent).
More telling is PNC's finding that 71 percent of Hispanic enterprise owners either "definitely" or "probably" will save cash in the coming six months as a hedge against the prospect of a national economic downturn.
The telephone survey was conducted in May and June 2012 with 523 business owners or senior decision makers of Hispanic-owned businesses reporting annual revenues of at least $100,000 but not more than $10 million, according to PNC Bank.
Respondents seemed to contradict their expressed optimism for market growth with a reluctance to expand through additional capital investing. More than two-thirds (68 percent) reported to PNC they intend to reduce expenses. However, only 15 percent said they anticipate staff reductions.
Daboub points out the concern economists have that Hispanic small-business owners are reticent to obtain capital and reinvest during seemingly unfavorable current market conditions, but he says he is encouraged by the survey because it gives PNC an opportunity to educate Hispanic entrepreneurs about obtaining loans and lines of revolving credit. He acknowledges that "cultural perceptions" and attitudes about borrowing and saving cash play an important role in the typical Hispanic small-business owner's decisions about raising capital and reinvesting.
"The family plays a major role in the business," says Daboub, a Hispanic-American born in Mexico City who came to the U.S. with his parents in 1979, when they immigrated to Portland, Ore. "The core values of the (Hispanic) family is definitely an important aspect."
The survey results reinforce the importance of family participation in Hispanic-owned businesses, with 60 percent of respondents reporting their families are involved in their enterprises and 45 percent stating they intend to keep the business in the family when they retire.
More than half of respondents (55 percent) were born in the U.S., according to PNC's survey; those born outside the U.S. report "they have lived in the country for an average of 35.4 years."
"Most Hispanic owners are seeking to hire English-speaking employees," according to PNC's survey, with "85 percent agreeing that speaking English is important, compared to only about one-third (36 percent) who feel it is important to speak Spanish."
They are also focused on political, public-policy and economic issues, particularly budgetary news, "with the majority saying they expect a negative impact on their business in the next year from taxes (60 percent) and the federal deficit (52 percent), followed by four in 10 focused on health-care changes (42 percent)."
Trust in Savings
Many Hispanics "have started from nothing" and built successful small businesses, Daboub says, adding that building "trust" with Hispanic entrepreneurs is paramount. Because of their reluctance to borrow money, Daboub explains, the challenge is to educate Hispanics about the advantages of expanding their businesses with capital that's available to them precisely because they have outstanding credit.
"Some business owners are actually using too much of their own assets," Daboub says. "Maximizing cash flow and using credit wisely are the best ways to grow a business."
The majority of business owners, he adds, "plan to conserve cash and reduce capital spending to pay down debt. While these are not bad (strategies), it does not position them well to grow their business when they do all these things at once."
When reviewing loan and credit applications, PNC Bank focuses on what Daboub calls the five C's, beginning with Capacity.
"Know your borrowing history and track record of repayment to help lenders evaluate their own risk," the bank executive advises.
The other four C's are Capital, economic Conditions, Collateral and Character.
Daboub points out that in evaluating collateral for small-business loans, lenders look closely at assets, real estate, new and aging inventory, and accounts receivable.
Acknowledging that "access to capital, historically, has always been an issue" for Hispanics, Daboub's advice to all entrepreneurs seeking to expand their enterprises through bridge loans, revolving credit and other forms of bank-supported financing is to "build reputation and character."
The complete 2012 survey is available to members of local Hispanic chambers of commerce in cities like Chicago, Tampa and Orlando, Fla.
"The chambers are hungry for this information, as is the general public," Daboub says.
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