Monday, February 08, 2016
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Integration Institute: Entrepreneurial Facts

Entrepreneurial Facts

Massachusetts’ economic future relies on the ingenuity, enterprise and hard work of its entrepreneurs—from small business owners to high-tech innovators. Immigrant entrepreneurs in Massachusetts pull more than their weight in both areas. That’s why cities and local and regional economic development initiatives from Boston to Lowell to New Bedford have worked to streamline regulatory processes, facilitate technical support, and reduce barriers to lending that impact immigrant and minority-owned enterprises. 

Click to read the Institute's Fact Sheet and State Policy Recommendations on immigrant entrepreneurs

Click to read the Institute's research memo on immigrant entrepreneurs

Non-traditional Paths to Capital

Due to the various and frequent barriers to lending faced by the immigrant community, many Massachusetts foreign born entrepreneurs have sought out and developed non-traditional paths to capital when starting a business.

For the average new company, 64 percent of start-up financing is internal equity (chiefly the entrepreneur's own resources), 30 percent comes from external loans (both bank and credit card), and the rest is made up of loans from friends, family and sought-after external equity (i.e., angel investors or venture capitalists). Immigrant-founded businesses are more likely to be deficient in access to both external loans and external equity and must find creative ways to make up this additional 36 percent of financing at inception.

In order to secure adequate capital and business assets, foreign born entrepreneurs have relied on non-traditional funding sources, namely their local credit union or community bank and their social networks.

Click to read the Institute's research memo on non-traditional paths to capital

Barriers to Lending

Common barriers to lending faced by foreign born entrepreneurs include lack of initial capital, inadequate credit history, limited access to information, training, or resources, a lack of institutional support for immigrant needs (in both the public and private policy and financial sectors) and predatory practices aimed at people who are foreign born.

Lack of initial capital may account for the fact that Massachusetts immigrant entrepreneurs generally start their businesses after they have lived in the United States for about a decade. At that point, the entrepreneurs' asset base is drawn from funds that they have saved and/or borrowed from friends and family. Foreign-born entrepreneurs may use real property ownership and management as a means to build equity, which can then be used in their business. Developing and maintaining these assets clearly takes several years and much effort.

Click to read the Institute's research memo on barriers to lending