Nearly 1 in 4 new businesses in the US are started by Latinos, and the number of Latino-owned businesses has risen to almost 5 million. And yet, access to banks and financial products is not as easily available for these entrepreneurs.
This week I talked to Sean Salas from Camino Financial to understand the Latino market in the US, how the business model of Camino works to allow them to serve micro businesses, and the lessons he has learned about building a company and fulfilling his vision.
Through technology and AI, Camino offers affordable loans to satisfy the demand for credit that rises to 20 billion dollars from Latino micro and small businesses. They raised over 150 million dollars of debt and equity funding, and in 2023 they merged with Fundation, an SMB tech-enabled lender and specialist in bank channel partnerships.
Learn about the US Latino market today:
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🗒 Show notes:
[02:46] - The Power of the US Latino Market
[07:40] - What You Don’t Know About This Market
[15:20] - Latino Only, Yes or No?
[22:55] - The Broccoli-Flan Paradox
[44:38] - The Big Expensive Bet in Fintech
[49:32] - A B2B Strategy is Key
🧠 Key Takeaways
#1 You need a Latino strategy: In the US, the Latino market is growing faster than any other market. For this reason, it is important to cater to this segment in your strategies, with products or programs meant for them. Now, this doesn’t mean that you must exclusively serve Latinos, but merely include them. Products that service this market can drive considerable growth to a business. And, because it is an underserved market, it can also drive loyalty towards a company that thinks about them.
#2 Don’t do only B2B: Going directly to businesses is a strategy that lowers the CAC and increases revenue. However, it can also create an exclusively transactional relationship between business and client without loyalty. To prevent this, it’s best to combine it with a B2C strategy to reach people directly and build loyalty with them. This creates a flywheel where the consumers are acquired through the businesses, making both strategies feed one another.
#3 The winning credit strategy: most underwriting is done considering traditional documents like tax returns and salary slips. This makes it difficult to evaluate the creditworthiness of people who may be self-employed or have fluctuating income for a variety of reasons. To solve this issue, you can look at alternate documents like the transactions they do in their bank accounts to try and estimate their income. This is widely used in emerging markets but could be used more in the US to offer financial products to underserved populations, such as immigrants.
😲You won’t hear this anywhere else
“We did a lot to really drive financial literacy and education. But, particularly in credit, they try to force-feed these financial tools and resources to clients as a condition for getting the credit. And the cold hard truth is that this is like force-feeding them broccoli. And the flan is the capital. As a small business owner, we’re living with very limited bandwidth, so sometimes we want the flan before we eat our broccoli, even if we know the broccoli is important. With this dynamic, extending a value proposition with education is really hard to do. We have tried incentive structures to make the broccoli more attractive and call it chocolate-covered broccoli, but those opportunities are still a work in progress. It’s not easy.”
🎧 Why Every Company Should Have a Latino Strategy