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Banking on Hispanic Americans U.S. banks are downright zealous in their pursuit of the Hispanic market


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 decor to their offices.

One 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."


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