By Henry Thomas on 5th October 2015
Biz2Credit has released its latest study into unequal distribution of financing in the US. The study has found that Latinos lag behind the rest of the population in many criteria required for funding. AltFi spoke to CEO Rohit Arora to delve deeper into the findings.
Key findings in the study included:
Reflecting on the data, Rohit commented:
“Our data shows that the criteria Latinos need for small business funding - such as annual revenue, credit scores, age of business and operating expenses - have improved since last year, but still lags behind non-Latino groups, which means that Latinos and other minority groups with similar numbers have a harder time securing traditional financing.”
The data only tells part of the story so we asked Rohit what was behind this disparity. The Chief Exec explained about the barriers for minorities obtaining financing:
“Immigrants, in particular, do not have the traditional networks that non-immigrants have. For example, they usually have not leased their space for long or do not have a longstanding relationship with their bank, which are both important factors for securing traditional funding.”
“They sometimes do not present their businesses well – banks require a rigid presentation of documents and even consider an owner’s mannerisms and appearance when they consider a loan. Sometimes there is a language barrier. Other times, the owner is not familiar with the American process.”
“The basics – As discussed above, having a lower credit score or revenue means less traditional options are available.”
One of the most celebrated aspects of disruptive finance is the democratizing effect. Rohit is a proponent of such democratisation and, in light of this new study, remarked:
“Tech-driven alternative lenders level the playing field and allow a neutral environment for business owners. There is no in-person meeting and no formal presentation of documents. Instead, it’s a simple and quick application form and sending a few documents over the web.”
The good news from this study is that the disparity – for Latinos at least – is lessening. In fact, this evidence is backed up in another of Biz2Credit’s studies, with a recent report showing that woman-owned businesses were on the rise. Minority groups appear to stand out as an important bastion of support for the alternative finance space, and vice versa.
Now in its sixth year, the AltFi London Summit returns on 18th March 2019 to 155 Bishopsgate. Last year proved to be a crucial turning point for the key players building the future of finance. Leading platforms launched oversubscribed IPOs, digital banks proliferated and mainstream financial institutions started their own disruptive propositions. With 2019 certain to be another landmark year, more questions will be asked by regulators with investor interest in disruption also poised for more rapid growth.