Hispanic economic activity could take a steep dive if key programs are cut as part of federal spending cuts, according to a network of nonprofits dedicated to growing wealth among Hispanics.
The National Association for Latino Community Asset Builders (NALCAB) is hosting representatives from 20 of its affiliates in a broad advocacy effort in Congress Wednesday to raise awareness of the connection between federal programs and Latino economic activity.
„I would say we’re more cautious. Our advocacy before was actually seeking additional funding for programs that support the work our members do in their communities,” NALCAB CEO Marla Bilonick told The Hill.
„I don’t think I’m saying anything that’s rocket science, but the cuts are actually going in the opposite direction to where we need to go. The need is still really high. And our members need more support for those on the ground, certainly not less.
The group’s demands come as Republicans and Democrats engage in a spending battle in an effort to avoid a government shutdown and maintain the 1 percent mandated spending cuts required by the recently passed Fiscal Responsibility Act.
That bill was signed into law by President Biden earlier this month, marking the end of a protracted fight over raising the debt ceiling. It also includes mandatory discretionary spending cuts if all 12 appropriations bills are not passed by Jan. 1.
That 1 percent haircut could cripple the Latino economy, Philonic said.
„Essentially this means that entrepreneurs who want to start or grow businesses cannot access the finance to do so. Aspiring homeowners will not get the support they need or the programs they need to access affordable housing,” he said.
„[Community Development Financial Institutions (CDFIs)] Consumers working in communities and small businesses in their communities lack sufficient funds to finance their move up the economic spectrum. So this has real consequences that should not be overlooked.
NALCAB’s targets include programs run by the Small Business Administration, the Department of Housing and Urban Development (HUD), and the Department of the Treasury.
It includes relatively small federal budget line items, such as Community Development Block Grants (CDBG), which provide targeted assistance for economic activities ranging from infrastructure projects to business development.
NALCAB’s target budget for CDBG is $4.2 billion in FY 2024, up from HUD’s $3.3 billion budget announced for the program in FY 2023.
The 2022 State of Latino Entrepreneurship An annual analysis report published by the Stanford Graduate School of Business found that Latino-owned businesses grew faster in number, revenue and wages than white-owned businesses from 2007 to 2019.
Between 2019 and 2022, Latino-owned businesses grew revenue by an average of 25 percent, while white-owned businesses grew by 9 percent.
However, Latino-owned businesses had higher liquidity needs and lower approval rates for loans over $50,000.
“When applying for business loans in nationalized banks, [Latino-owned businesses] Similar, if not better, than merit indicators [white-owned businesses] On average,” the Stanford researchers wrote.
„However, [Latino-owned businesses] have significantly lower approval rates than [white-owned businesses] Higher approval rates for smaller loans (less than $50,000) while applying for larger loans ($50,000 or more),” they added.
Lack of access to capital is nothing new for Latino entrepreneurs, but federal cuts to programs like CDFIs could add to the problem, Philonic said.
„A big lever for entrepreneurship is access to capital, and the traditional financial system is not very friendly to Latino entrepreneurs,” he said.
The cuts will be especially painful for the entrepreneurs who drive the economy, Pilonik said.
„I’m talking about sole proprietors, street vendors who want to move to a storefront, people who are in this transition, whether it’s going from an idea to a business or a business moving to two locations,” he said.
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