Immigrant Entrepreneurs Face Unique Challenges

More than almost any other state, New Jersey is a land of immigrants.

The Migration Policy Institute reports one in five Garden State residents were born in another country. Immigration over the past 10 years has contributed to a 39 percent increase in New Jersey’s Hispanic population, which now numbers more than 1.5 million, according to U.S. Census Data.

The desire to start a business looms large in the minds of many of those who make New Jersey their adoptive home. But entrepreneurship is difficult for new Americans.

“I believe the real American dream is to own your own house and to have your own business,” said Luis De La Hoz, a Colombian emigrant, longtime entrepreneur and Spanish Program Coordinator at the Intersect Fund.

Before joining the Fund, De La Hoz ran the New Brunswick office of MarMar, a business he co-owns that offers tax preparation, bill payment services, and travel arrangements to a largely Hispanic – and largely immigrant – clientele.

I asked De La Hoz to draw from his work with hundreds of Hispanic business owners and identify three key challenges faced by this large and growing group. Here’s what he came up with:

1. Not knowing whom to trust

   When it comes to services and advice, immigrants tend to associate a high price tag with trustworthiness, De La Hoz said. Too often, this trust is unfounded.

   For example, De La Hoz knows of one central New Jersey firm that collected hefty fees from in clients in exchange for the promise of green cards. The firm’s owner collected some $500,000 in fees before closing his shop, having secured the cards for only a fraction of his clients.

   De La Hoz has heard of similar situations in which agents collect thousands of dollars from immigrant families on the empty promise that they’ll secure their customers a favorable mortgage refinancing deal.

   The tendency to associate high prices with high quality is by no means confined to immigrant communities, nor is susceptibility to mortgage scams. But those who are unfamiliar with U.S. law and culture (or who struggle with English) must be especially vigilant when seeking legal and financial advice.

   

   Pictured right, De La Hoz

2. Catering to a crowded market

   If you’re new to the country and seeking quick profits, you’re likely to start a business offering basic

   products and services. The trouble is that everyone else is, too. “If there are too many beauty salons, restaurants or bodegas, there won’t be as much of a market for everyone,” De La Hoz said. These businesses are attractive because they deal in cash — no need to wait for customers to pay their bills — and because the market for each seems limitless. After all, everyone needs hair care, food and home goods, and they need each often.

   De La Hoz notes that while starting a business like this is relatively painless, running one can be constricting. A bodega can sell only to residents of a small area. Once dozens of competing bodegas have each staked out their respective portion of the market, it can be difficult for any one of them to grow.

   The key to growth for immigrant entrepreneurs, De La Hoz said, is to explore professional services and high tech businesses. Granted, each requires specialized skills and a lot of capital. This brings us to the third challenge De La Hoz cited:

3. Failing to use government services or nonprofits

   Because many businesses require significant capital and expertise, entrepreneurs get help before starting one. This help comes in the form of a loan, trusted advice from close associates, or both. Those who are new to the country, though, often lack a credit history or a tight network from which they can draw advice.

   De La Hoz recommends taking advantage of low-cost ways to secure capital and seek counsel: the Small Business Administration and its intermediary groups offer loans and technical assistance to those unable to secure either from commercial banks. Government-sponsored Small Business Development Centers connect experienced business owners to new entrepreneurs to offer advice, and chambers of commerce provide valuable networking opportunities for modest annual fees.

   De La Hoz said many of his immigrant clients are skeptical of inexpensive or free services like those mentioned above, but noted that those who seek them out are glad they did.