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Banks haven’t caught up with demographics

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Posted: Wednesday, October 26, 2005 5:52 am

Rosa Cantor plans to lead a bank more like the ones in Latin America. The Mesa businesswoman hopes to help fellow Hispanics obtain capital to start and expand their businesses.

Many firms, she says, begin with family money or loans with interest that is triple the market rate.

"The banking industry is a relationship industry," she says. "We as Americans are used to doing the Internet and we don’t even get to see our personal banker, where in Mexico people go to the bank and have a relationship with the tellers, the president of the bank, with the CFO, and it’s almost like a family.

That’s what’s different about our Hispanic culture . . . that we are very close when it comes to the people that we deal with."

Cantor is on the board of directors for Sonoran Bank, which is scheduled to open in Phoenix later this year or in early 2006. Financial institutions are becoming more friendly to Hispanics, but getting loans is still a challenge, she says.

"I have not really gotten anybody to tell me ‘I got this big loan from so-and-so bank because I’m a minority or Hispanic,’ " she says. "I know that the banking industry, just like any other service industry, is seeing the buying power of Hispanics."

Napoleon Pisano, a member of the Mesa Association of Hispanic Citizens, says there’s no shortage of Hispanics willing to take the plunge into business, but lending institutions have not caught up with changing demographics.

"It’s by chance, not by design," he says. "You see some new banks coming in specifically in Mesa . . . They seem to be more aware of the needs of the Hispanic population and trying to provide those type of services. Having said that, there’s also the downside of that. Predatory lending comes to mind immediately in terms of home buyers."

Later this month, Mesa Community College will open a smallbusiness help center. Economic development officials say the center will direct Hispanics and other minorities to services such as the Small Business Administration and the Neighborhood Economic Development Corporation, a nonprofit that lends money for businesses in low- and moderateincome communities.

"There are tremendous issues with access to capital," says Lisha Adela Garcia, Mesa neighborhood services manager. "We are in a vacuum when it comes to capitalizing on neighborhood businesses."

East Valley economic development officials concentrate on cluster economies like biotech and aerospace, leaving neighborhoodbased businesses in a void partly because of budget constraints, Adela Garcia says.

Karen LaFrance, Neighborhood Economic Development Corporation executive director, says her group works with businesses that are starting up or expanding but can’t get bank financing. For instance, many may have already used their assets when they started, such as taking out a second mortgage on their homes.

"We would look at that business plan and whether their expansion is going to be able to support the debt service and we would be less rigorous," she says. "We will look at other forms of collateral."

LaFrance says the group has made small loans to several Hispanic businesses and it was one of three lenders on a $2.5 million deal that will bring the the Carniceria Rancho Grande to the southeast corner of Main Street and Horne in Mesa.

The 24,000-square-foot grocery store’s owner has another grocery store at Broadway Road and Central Avenue in south Phoenix. It is slated to open the first week of November.

Of the businesses that LaFrance has visited over her five years at the group, one-third to one-half are Hispanic-owned.

"In terms of the financing we’ve done over the years, over half are Hispanic-owned," she says. "I don’t find that surprising. Typically when you have an entity like a NEDCO, the businesses that do not fit the mainstream tend to be minorities and women."

Like many organizations who serve Hispanics, Neighborhood Economic Development Corporation needs to do more marketing, LaFrance says.

Just 37 percent of respondents in the Valley were very familiar with nonprofit or government services aimed at business, according to the just-released Salt River Project Arizona Hispanic-owned Business Study.

NEDCO shares space with the Mesa Community Action Network, a social service agency for the city’s poor. LaFrance says a survey two years ago showed most Hispanics who came for assistance did not have a bank account.

"Amongst lower- to middleincome families, there is a distrust of large institutions, banks," she says.

She says one of NEDCO’s goals is work with businesses to secure traditional financing.

"If you don’t have a credit track record as a business, it’s kind of difficult to get into using a bank," she says. "One of the things we provide to people that borrow from us is we’re going to make reports. We’re going to improve their track record. For instance, we insist that folks have bank accounts because, over time, if they’re going to have a successful business, they’ve got to be involved with a bank."

Phil Austin, an attorney and president of Mesa Association of Hispanic Citizens, says there are some banks that are friendly to Hispanics, including Wells Fargo. His group also recently met with US Bank.

"The banks have a requirement under the Community Reinvestment Act to work with low-income communities," Austin says. "We are little by little, not threatening them, but saying ‘Hey we have a link here. We have a list of 500 or 600 businesses we’re working with.’ "

Cantor says lack of loans has led many Hispanics to seek money from family members, making the gamble of opening a business an even bigger risk.

"It’s not only the business. It’s the family money," says Cantor, one of three owners of Creative Human Resources Concepts, a Falcon Field labor placement firm for the aerospace industry. "It’s your reputation. Your word is your pride. Pride is No. 1. We’re a very proud people and we’ll work as hard as it takes to make sure that we make it happen. That has been our culture throughout hundreds of years. The work ethic is very, very high."

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