|
News & Articles
Banking on Hispanic Americans
U.S. banks are downright
zealous in their pursuit of
the Hispanic market
By BRIDGET McCREA
When Marx Acosta-Rubio started up Chatsworth,
Calif.-based Onestop in 1998, he tapped
his mother’s life savings for the $70,000
needed to get a line of credit for the same
amount. But when Acosta-Rubio wanted to grow
his wholesale business a year later, he went
back to the same bank and got a $50,000 unsecured
loan. Today, Acosta-Rubio’s 19-employee firm—a
broker of printer, copier, fax and inkjet
toner and computer peripherals—has about
$5 million in sales and a $200,000, unsecured
credit line that he most recently used to
move into bigger digs and hire new employees. “I
wouldn’t have gotten my company to $5 million
in sales had it not been for the bank and
their willingness to work with me,” says
Acosta-Rubio.
That U.S. banks are courting customers like
Acosta-Rubio should come as little surprise.
They’re vying for a piece of the 37 million-strong
Hispanic market that boasts more than $580
billion in buying power, according to the
U.S. Census and the Selig Center for Economic
Growth. Analysts say 2000 census data showing
the Hispanic population grew 58 percent in
the past 10 years—and will represent 25 percent
of the total U.S. population by 2050—has
spurred the interest.
The evidence is everywhere, from Bank of
America’s fully bilingual website to Chicago-based
Harris Bank’s Spanish-language ads. Banks
are increasing their lending budgets for
Hispanic businesses, making it easier to
transfer money to Mexico, rolling out products
geared at Latin customers, hiring more bilingual
employees, introducing Spanish-language marketing
literature and financial education programs,
and even adding Latin-themed décor to their
offices.
pOne bank that jumped into the fray early
on was San Francisco-based Wells Fargo. Recently
named Corporation of the Year by the California
Hispanic Chambers of Commerce (CHCC) and
the Texas Association of Mexican American
Chambers of Commerce (TAMACC), it started
its Latino Loan Program in 1997 to help meet
the needs of Latin  entrepreneurs
in need of capital.
“We did a study and learned that the
main [problem] Hispanic business owners faced
was a lack of access to capital,” says
Tim Rios, national spokesperson for Wells
Fargo’s Latino Business Services program. “They
just didn’t feel like commercial banks
were inviting them to their doors to take
out loans and expand their businesses.”
To fill the need, Wells Fargo developed
its loan program in conjunction with the
U.S. Hispanic Chamber of Commerce. Since
then, it has loaned $1.6 billion through
the program, whose name was later changed
to Latino Business Services and expanded
to include checking accounts, payroll services
and merchant card services. It’s no wonder
Wells Fargo wants to reach the expanding
base of U.S. Hispanic-owned businesses: the
number of Latin enterprises is growing faster
than the number of companies owned by non-Hispanic
white Americans. “Many of these entrepreneurs
start their own firms because they don’t
see opportunities for themselves in corporate
America,” says Rios. “Latinos want to build
wealth for themselves and for their families—something
that has escaped the Latino communities in
our country for years.”
Filling the gap
However,
many Latin entrepreneurs
still rely on self-financing—or
that of friends and family—to
start and grow their companies.
Held back by an inherent
distrust of banks, lack of
documentation and credit
histories, they largely avoid
bank financing.
Even while recognizing these challenges,
Bank of America sees a giant opportunity.
In December 2002, the bank paid $1.6 billion
for a 25 percent stake in Grupo Financiero
Santander Serfin, one of Mexico’s largest
banks, thereby entrenching itself in the
fast-growing Hispanic financial services
market—one driven by the billions that U.S.
Hispanics send back to Mexico every year.
Last year, Mexican Americans sent $9.3 billion
home, according to the Pew Hispanic Center
in Washington. This year, that number will
grow to $13 billion; and it will reach $18
billion by 2005.
Eusebio Rivera, Jr., senior vice president
of the Hispanic Initiative Executive for
Bank of America in Charlotte, N.C., says
the bank also is making it easier for Latin
entrepreneurs to apply for loans, hiring
bilingual associates and creating more Spanish-language
materials. “We’ve positioned ourselves to
help them with future growth and financial
needs.”
The same goes for Gainesville Bank and Trust
of Gainesville, Ga., which opened their Banco
Familiar initiative in the heart of Atlanta
Highway—an area known for its high concentration
of Hispanic businesses—three years ago. “We
knew we had to be there to reach them,” says
Richard Hunt, the bank’s chairman. “If we
didn’t, we’d be ignoring a major segment
of our market.”
He points to language barriers, cultural
differences, and regulatory and legal issues
as some of the biggest obstacles to reaching
that growing population; but notes that many
new banking relationships begin with education,
rather than selling bank products.
New business customers from Mexico, for
example, don’t always understand the need
for a business license and other documentation. “You
can’t just set up shop and open a business
here without a business license and jumping
through a few hoops,” says Hunt.
Sometimes Hispanic customers don’t understand
those restrictions.” To lower such barriers
and embrace a Hispanic population that’s
grown by 117 percent in Indianapolis, Mo.,
over the last decade, Steve Barnes, senior
vice president at Fifth Third Bank, says
his bank has made all its ATMs bilingual,
created Spanish-based advertising and hired
bilingual employees. It has also expanded
its “multicultural diversity training” program
for employees, teaching them “the differences
and similarities of banking for Latinos,
[as opposed to non-Latins],” says Barnes.
The Midwestern bank is even offering Spanish-language
classes to its managers and employees. “We’ve
identified the banking centers in our market
with a heavy Hispanic base, and we’re targeting
those locations first,” says Barnes. “While
we do work with all business owners, the
growth of the Indianapolis Latino community
has given us more incentive to focus on that
segment.”
New business wanted
James Ballentine,
director of community development
for the American Bankers
Association (ABA) in Washington,
says there’s another
reason that banks are so
attracted to Hispanic small
business borrowers: American
Hispanics show a great deal
of loyalty towards brands
and companies that serve
them well, he says. “When
Hispanics find a  product
or service that they have
confidence in, they tend
to stick with it,” says
Ballentine. “As a result,
banks’ outreach efforts
to the community always benefit
[them] in the long term.”
But if American banks are reaching out to
Hispanic entrepreneurs, some say they haven’t
felt the effects. Mario Espina, chairman
and CEO of Total Care Staffing Services LLC,
in Miami, has been refused $300,000-$500,000
lines of credit several times in the past
two years. “It’s the same story
every time: the banks have a long list of
wants that just aren’t achievable for
a startup company.”
Founded in 2001, 30-employee Total Care
Staffing recruits qualified nurses from abroad
(primarily from the Philippines) and hires
them out to U. S. hospitals. Even though
the company posted about $7.5 million in
sales in 2002, one bank asked not only for
its accounts receivable as collateral, but
also wanted additional assets that Espina
just couldn’t provide.
He doesn’t buy the idea that the larger
banks are opening their doors to Latin businesses—at
least not in South Florida. “If banks
are targeting accounts, they’re targeting
accounts across the board, not just Hispanics,” says
Espina.
They’re certainly not targeting Hispanic
small business owners, he says: “One
Hispanic-run bank may be targeting Latin-owned
businesses, but we haven’t even been
touched by that.”
Indeed, the data reinforces his position:
the rejection rate on loan applications for
Hispanic entrepreneurs is about 50 percent,
twice as high as their non-Hispanic white
counterparts, according to 1998 Federal Reserve
data—a fact that industry observers
say underscores lost opportunities for banks
as well as a need for Latin immigrants to
do a better job educating themselves about
U.S. banking.
To overcome both sides’ challenges,
the two must do their part, they say: Hispanic
business owners must learn the ropes of the
American lending process, and banks have
to go beyond just translating marketing materials
and applications from English to Spanish.
“For banks to reach the Hispanic community
requires real initiative,” says Ballentine. “You
can translate materials into Spanish, but
if a Hispanic customer walks into a bank
and no one’s there to speak their language,
then it does no good, anyway.”
Continue >>>
|
