Senate Democrats

Hispanic Small Businesses: Diversity, Economic Growth, and Job Creation in America

America’s small businesses are the backbone of our economy, helping to keep the country competitive through innovation, new ideas and new jobs. Democrats recognize that one of our nation’s greatest assets is our diversity. Investing in minority-owned businesses, therefore, helps to increase the value of that asset and to promote economic growth and job creation. When minority-owned businesses succeed, the communities in which they operate benefit through increased job opportunities for local residents and economic development in the surrounding neighborhoods. As we move closer toward a new Administration, Democrats will continue to fight for the interests of minority-owned small businesses to promote and expand economic success.

Hispanic small business enterprises are growing. Over the last ten years, minority-owned business enterprises accounted for over 50 percent of the two million new businesses started in the United States, crossing every industrial sector from financial services and health care to construction and transportation. Today there are more than four million minority-owned companies in the country with annual sales totaling $694 billion. Between 1997 and 2002, the number of Hispanic-owned firms increased by 31 percent. (SBA Office of Advocacy, 4/2007)

Hispanics or Latinos constitute the largest minority business community in the United States, owning 6.6 percent of all U.S. firms. There are 1.6 million Hispanic-owned firms in the United States, supporting 1,536,795 employees. Approximately 30 percent of these firms are owned by women. Women own 22 percent of Hispanic-employer firms and 36 percent of Hispanic-nonemployer firms.

A state-by-state report on the Hispanic small businesses is attached in Appendix A.

Minority-owned firms, however, make significantly less than their non-minority counterparts. The average gross receipts of minority firms were $162,000 – considerably lower than the $448,000 average gross receipts of non-minority firms. On average, for every dollar that a White-owned firm made, Hispanic-, Native American-, and Asian-owned businesses made 56 cents; Black-owned businesses made 43 cents; and Pacific Islander-owned firms made about 59 cents, according the Small Business Administration (SBA) (SBA Office of Advocacy, 4/2007).

Hispanic-owned firms receive a disproportionately low percentage of government-backed business loans. Hispanics represent 14.8 percent of the U.S. population. (Census Bureau, 5/2007) Government-backed small business loans to Hispanics, however, have remained stagnant over the last seven years, despite the fact that they comprise the largest group of minority business owners. Last year, Hispanics received about ten percent of 7(a) loans – the government’s largest loan program for working capital – and only seven percent of total dollars lent. (SBA)

The Small Business Administration should be a resource for minority-owned firms. The SBA is supposed to reach out to more minorities, women and other underserved communities to market their financing, contracting, and training programs. For the last seven years, however, the Bush Administration has not made helping underserved communities a priority.

The continuing disparity between the number and earnings of minority firms in the United States and the continuing barriers many minorities face as they seek to start or expand a business demonstrates the need for targeted programs at the federal level for minority entrepreneurs. Despite signs that small businesses are facing increasingly difficult market conditions, President Bush’s Fiscal Year 2009 budget proposal for the SBA raises fees on loans, provides no funding for microloans, fails to invest in more contracting oversight, and cuts funding for key business assistance programs like Women’s Business Centers and Small Business Development Centers. 

Senate Democrats Are Committed to America’s Small Businesses

Democrats support investing in small business programs to leverage resources and grow the economy. There are 27 million small businesses in the United States and 99.7 percent of all firms are small businesses.  Over the last 15 years, small businesses have been responsible for creating 93 percent of all new jobs and employing about half of the American workforce, totaling 58.6 million people.  Small firms account for about half of our economy. In 2006, small businesses generated $993 billion in income.  

The Democratic-led Senate has passed legislation that would support small businesses with tax relief, energy efficiency measures, new competitiveness programs, increased funding for small business assistance, and disaster preparation and recovery. Democrats have also exercised continuing leadership to expand contracting opportunities for small businesses, even in spite of Republican obstructionism. As the 111th Congress approaches, Democrats remain committed to advancing small business growth, especially in underserved communities (minorities, women, veterans, and urban and rural areas).

Providing Tax Relief

The 110th Congress responded to the needs of the nation by passing a stimulus package that includes tax relief for small businesses.  On February 7, 2008, both Houses of Congress passed the Economic Stimulus Act of 2008 (H.R.5140), by overwhelmingly bipartisan votes.  In passing this legislation so quickly, the Democratic-led Congress kept its promise to effectively mitigate an economic downturn.  The measure, signed into law on February 13 (P.L. 110-185), promotes job-creating business investments by providing tax relief for American businesses, especially small businesses.

Specifically, the new law will allow small businesses to elect to expense the cost of qualified assets they purchase in 2008, within certain limits in lieu of depreciation. The provision increases the expensing limit from $125,000 to $250,000 for firms with a threshold of up to $800,000.

Democrats enacted small business tax relief. The Small Business and Work Opportunity Tax Act, passed as a part of the 2007 Emergency Supplemental (P.L. 110-28), provides important tax relief for America’s small businesses. These deficit-neutral tax incentives include measures to:

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