Congress Considers Proposals to Help Immigrants Start Small Businesses

November 11, 2019 by Tom Ramstack
Businesses in the commercial district of Princeton, New Jersey. (Photo by Dan McCue)

Business leaders in California appealed to Congress Friday to expand financial assistance to immigrants trying to start their own businesses.

They said small government investments can create big payoffs when immigrants start successful businesses that pay taxes and employ other persons.

The U.S. Small Business Administration loans offer “an opportunity for small businesses to take that next transformative step and eventually transition into conventional loan clients,” said Rachelle Arizmendi, chief operating officer at the Pacific Asian Consortium in Employment, a nonprofit community development organization in California.

Arizmendi and other business leaders testified at a House Small Business subcommittee on investigations, oversight and regulations field hearing in Rosemead, Calif. They want Congress to raise the cap on Small Business Administration loans and make them available to more applicants.

“Anecdotally, we know these programs work and I am confident that statistically, you will find the same results,” said Arizmendi, who also is a Sierra Madre, Calif., city council member.

Much of testimony during the hearing focused on the Small Business Administration’s Community Advantage Loan program. It is designed for new and existing businesses that need loans as high as $250,000.

The Small Business Administration designates lenders throughout the United States to offer the Community Advantage loans. The agency then guarantees repayment for as much as 85 percent of the loan amount if the business owner defaults.

Default rates are running between 4 percent and 5 percent.

Arizmendi advocates increasing the loan cap to $350,000. She also said it should be offered more widely to women-owned and minority-owned businesses. She said the eligibility also should include more businesses owned by military reservists, spouses of veterans or members of the armed forces.

“We know first-hand the possibilities and opportunities that SBA products offer small business owners,” Arizmendi said. “Yet, there are improvements to these products that can be made.”

The United States is home to nearly 45 million immigrants, according to a recent congressional report. More than 3.1 million have started small businesses.

They employ an estimated eight million people, generate over $1.3 trillion in sales and pay more than $4 billion in taxes.

The Small Business subcommittee is considering legislation to close the gap on immigrants who lack equal access to business loans and development opportunities.

The Kauffman Indicators for Entrepreneurship, which reports on U.S. entrepreneurial trends, found that the 2018 rate of new entrepreneurs among immigrants was close to double the rate for native-born entrepreneurs.

Among ethnic and racial groups, Asians and Latinos experienced a significant increase in the share of new entrepreneurs between 1996-2018, while African Americans’ share of new entrepreneurs increased only slightly, the Kauffman Indicators showed. Immigrants make up nearly 30 percent of all new entrepreneurs, a significant increase from 13.3 percent in 1996.

The congressional field hearing was held in California because about 27 percent of its population, or 11 million residents, are foreign-born. California has more immigrants than any other state.

Don Loewel, director of the Small Business Development Center at Pasadena City College, said many immigrants lack awareness of business and financing opportunities.

The Small Business Administration partners with Small Business Development Centers nationwide for outreach to local businesses. The centers offer counseling and training to small business owners and entrepreneurs.

Loewel said during the hearing that “awareness is the number one opportunity we have to make greater impacts on small business success. Putting aside the owner’s nationality, it is difficult to serve the small business population if they are not aware of who we are and how we can help.”

He spoke in favor of legislation that would authorize Small Business Development Centers to use federal funds to market their services directly to small businesses.

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