After a four-year downward trend, startup activity climbed in 2014, according to the recently released 2015 Kauffman Index of Startup Activity.
According to this study, entrepreneurs are coming from many different backgrounds and life experiences. In fact, all racial and ethnic groups--particularly Latinos--experienced increases in the rate of new entrepreneurs in the past year. The Latino share of new entrepreneurs has risen from 10.0 percent in 1996 to 22.1 percent in 2014. The Asian share also increased substantially during this same period. Meanwhile, the share of white entrepreneurs has declined over the past 18 years, and the black share increased slightly.
With a growing population of immigrants, who inherently are risk-takers and entrepreneurial, these results should not be so surprising. The Kauffman Index found to a rising share of new immigrant entrepreneurs: 28.5 percent of all new entrepreneurs are immigrants in the 2015 Index, compared to 13.3 percent in the 1997 Index.
Recently, Biz2Credit conducted a study of the top cities for small business in America. Atop the list was Riverside, California, and its surrounding area. The area is a prime location for immigrants from Mexico and Central America. However, there also is an influx of newcomers from the Pacific Rim, South Asia, and the Middle East. All of them are attracted to this country by the American Dream of small business ownership.
The top 10 in order: Riverside, CA; New York City; Houston; Detroit; Charlotte, NC; Chicago; Denver; Las Vegas; San Francisco-Oakland, CA; Miami. What do these areas have in common? New York, the San Francisco Bay area, and Las Vegas are hubs for IT. Detroit placed surprisingly well because of IT related to the production of automobiles. Additionally, the real estate markets in areas has rebounded quite nicely, which bodes well for construction businesses. Food and retail enterprises also are thriving in these markets. Many times, these companies are run by immigrants who set up businesses and introduce Americans to the cuisines of their homelands.
Despite the success of immigrant entrepreneurs, they often encounter difficulty in securing financing. For instance, it is not uncommon for them to have little or no credit history. This can be particularly challenging for anyone seeking a bank loan to start a business. Fortunately, as non-bank lenders are making funding available through marketplace lending platforms such as Biz2Credit and others, immigrants have options that previously were not available just a few years ago.
Over the years, I have examined portfolios of banks that are involved in small business lending. What I discovered long ago is that immigrant entrepreneurs are not the risky bet that many people assume. In fact, because they are so determined to succeed in this country and often have a family-based support system, their default rates are often lower than native born American business owners. This is a primary example of why immigrants add vibrancy and vitality to the U.S. economy. Indeed some of America's greatest corporations started as small businesses founded by immigrants or their children. The list includes people such as Steve Jobs and Walt Disney, and companies including Google, eBay, Apple and AT&T.