Arizona Latinos Face Disproportionate Challenges to Start and Maintain Their Businesses

Over a quarter of all Arizona businesses are owned by racial and ethnic minorities. Despite its contribution to the economy, a new study by UCLA's Latino Policy & Politics Institute showed that ethnic-owned businesses, Latino business among them, confront disproportionate challenges to start and maintain them, including obstacles in securing financial capital, difficulties accessing relief funds, and heightened employee turnover during crises.

In the wake of the Covid-19 pandemic and an escalating emphasis on environmental consciousness, the study sheds light on the experiences of ethnic small business owners in Arizona. Utilizing a comprehensive approach including phone and web surveys, along with interviews, it focuses on key aspects such as access to capital, the impact of COVID-19, environmental sustainability practices, and climate change.

The survey, encompassing insights from over 400 small businesses in Arizona and complemented by five in-depth interviews, reveals four pivotal findings:

Access to Financial Capital:

Black- and Latino-owned businesses encounter greater hurdles in accessing financial capital compared to their white-owned counterparts. Black-owned businesses report challenges at rates nearly three times higher than white-owned businesses (52% vs. 18%). Similarly, Latino-owned businesses face barriers almost twice as often (32%) as their white-owned counterparts. For those businesses encountering challenges, insufficient financial capital emerges as the most prevalent obstacle, with 71% of Black-owned and 68% of Latino-owned businesses highlighting this concern.

"Among those who reported experiencing challenges in obtaining funds or capital for their business, a greater percentage of Black- and Latino-owned businesses reported low or poor credit scores, unaffordable interest rates, and an insufficient amount of capital as challenges," reads a paragraph of the study.

Impact of COVID-19:

Ethnic-owned businesses, particularly Black-owned enterprises, continue to grapple with the aftermath of the COVID-19 pandemic. A substantial 60% of Black-owned businesses note a "large negative effect," surpassing the percentages reported by Latino- (41%) and white-owned businesses (46%). Furthermore, Black-owned businesses are twice as likely as white-owned businesses to anticipate a need for financial assistance or additional capital in the next six months (54% vs. 26%), with 37% of Latino-owned businesses sharing this anticipation.

Awareness of Climate Change:

Ethnic-owned businesses demonstrate a heightened awareness of climate change compared to white-owned businesses. Both Latino- (43%) and Black-owned businesses (42%) express a higher likelihood of ranking climate change risks as a high or medium priority, exceeding the percentage among white-owned businesses (29%).

"One in five businesses surveyed reported observing climate change impacts to their business. This rate doubled for anticipated impacts. Two in five businesses surveyed reported that they anticipate climate change will impact their business's finances
and their workers' safety in the future. One interviewee reflected on how the intensity of Arizona summers has already directly harmed her employees, with some having sought urgent care because of dehydration," reads a passage of the study's conclusion.

Environmental Sustainability Planning:

Ethnic-owned businesses are actively engaging in environmental sustainability planning. Black-owned businesses exhibit a two-fold likelihood compared to white-owned businesses in intending to develop a formal sustainability plan in the future (38% vs. 19%). Latino-owned businesses also surpass their white-owned counterparts in expressing their intent to develop a sustainability plan (23%). Notably, a majority of white- and Latino-owned businesses (55% and 52%, respectively) anticipate no need for future sustainability plans, in contrast to 40% of Black-owned businesses.

"As ethnic enterprises continue to grow in number, it is imperative that they be incorporated equitably in economic development and environmental sustainability planning processes. They play a vital role in their communities through job creation, generation of revenue,
and promotion of social and cultural diversity," the study concludes.