In the heart of the burgeoning Latino business district on East Grand Avenue between East 15th and East 16th streets, Manuel Magallanes and Jesús Alcaras run the thriving Tienda Mexicana.

Most of the time, the store is bustling with customers buying authentic Mexican grocery items from neatly stocked shelves, fresh-baked bread and pastries, or meat from a selection renowned among the Latino community. The two owners joke with their customers in Spanish while they run between the small office, which fills money orders and sells phone cards, the cash register and the meat counter.

Magallanes and Alcaras bought La Favorita, where they were employees, about three years ago, then changed the name and moved the business a year ago. The new location has more space and a bigger parking lot, and the Neighborhood Development Corp., which owns the building, has agreed to renovate their store, which will likely occur this summer.

Alcaras, speaking through a translator, said his goal is “to contribute to the progress of the whole area. We have the ambition to have several stores like this.” Yet, because of the language barrier, it has taken him more than a year to open a bank account for the business, and he said it has been difficult for him to reach a bilingual government employee who can help him apply for necessary permits and licenses.

Magallanes and Alcaras are facing the same problems as many other Latino business owners in Greater Des Moines. Though they want to expand their small businesses, they lack the capital and understanding of government regulations needed to do so.

“A lot [of Latino business owners] start just by opening up a place and selling stuff and working their business out of a cash register,” said Armando Villareal, administrator for the Iowa Division of Latino Affairs. “Now they need to get professionalized if they want to expand and grow.”

A study conducted by the U.S. Small Business Administration found that 34 percent of Latino-owned businesses expanded between 1997 and 2001 nationwide, which was more than 6 percentage points higher than non-minority-owned establishments. However, in Iowa, the survival rate for Latino-owned businesses is 54 percent, 20 percentage points lower than non-minority-owned firms.

“A lot run into brick walls because they don’t get the proper licenses and inspections or open a business that is not zoned correctly,” Villareal said. “A lot of times, the effort and capital invested is lost. The ones that have been able to survive do so by sheer force of will.”

Supporting these businesses is important given that the Latinos are the fastest-growing minority group in Iowa. In 2005, Latinos constituted 3.7 percent of the state’s population according to the U.S Census Bureau. By 2030, Woods & Poole Economics Inc. projects, Latinos will be 9.8 percent of the state’s population.

In addition to creating jobs and adding to the area’s tax base, Latino businesses stimulate the economy in other ways. “Hispanic businesses tend to start in areas neglected or abandoned,” said Max Cardenas, a native of Peru and founder of Diverse Innovative Solutions, a financial services firm that helps minority-owned businesses. “By a business opening up, they revitalize underserved communities and create value where there wasn’t value before. Also they enrich the quality of life. The city as a whole has access to new products and new services, which are very well provided.”

Many Latino immigrants open businesses, Villareal said, because they are having trouble finding jobs or had a business in their countries or origin.

“There’s a huge entrepreneurial culture in Mexico that Hispanic entrepreneurs bring with them,” Cardenas said. “What makes a good entrepreneur is hard work, dedication and risk-taking, and those are values that are very strong in the Hispanic community.”

But many Latino-owned firms start out and remain small. Nationally, just 12.7 percent of all Latino-owned firms have paid employees, according to the U.S. Census Bureau’s 2002 Survey of Business Owners, but in the Des Moines area, Armando said, Latino-owned businesses average between five and 20 employees.

There are many factors why these businesses fail to expand or don’t survive.

Most owners don’t start with a business plan or make long-term projections for their business, Cardenas said, and they start up with capital from family and friends.

Many also don’t understand the legal requirements for opening a business and have trouble reaching someone who speaks Spanish and can help them figure out what they need to do to get started. Brando Guerrero, who became president of the Latino business association Alianza last month, said a common issue has been Latinos who open businesses that don’t abide by zoning regulations. Just expanding, Cardenas said, often requires additional permits and licenses, new hiring packages and new insurance packages.

Many also cannot secure loans from traditional lending sources due to the way banks screen their clients before making loans. Those who recently immigrated to the United States, for example, haven’t established a credit history. In addition, Guerrero said, most of these businesses are not looking for a $300,000 loan but rather need $30,000 or less, and most financial institutions are unaccustomed to making such small loans for business purposes.

“A lot of these folks want to do good,” Villareal said, “and [because of their] exuberance, they sometimes skip some details unintentionally, which later comes to haunt them.”

Staying open during the winter has been a challenge for Marin Perez, who started Paleteria la Michoacana, a small franchise store that sells Mexican fruit drinks and ice cream bars, 18 months ago. Sometimes, he said, speaking through a translator, you have to decide whether to pay the house mortgage or the business mortgage. He wishes there was access to a loan or additional capital, around $10,000 to $15,000, that would allow him to get through the slow months and eventually achieve his goal of opening more stores.

“I’m not asking for easy money or a gift, more a loan, which would allow one to improve and expand and be a better business,” Perez said. “Hispanic businesses reach a tipping point where they can expand, stay the same or go down. That’s the point where capital is needed to help keep growing and prevent the business from failing.”

Door-to-door surveys of Latino business owners in Des Moines, Perry and Marshalltown conducted by the Iowa Division of Latino Affairs found that the most common request from Latino business owners was to have a Spanish-speaking certified public accountant. Villareal said that having more bilingual CPAs is important because “that is the most trusted outside professional they use.”

Based on this and other findings from the surveys, Villareal worked with AIB College of Business to offer the first-ever Latino Business Breakfast, which took place at AIB’s activity center Nov. 14. The event, which attracted around 30 people, about half of what was expected, had speakers who discussed writing business plans, tax requirements and other business issues.

Carlos de León decided to attend the event because he would like to expand his 3-year-old restaurant, El Salvador del Mundo, to a second location. Although his first restaurant has been successful, he said, speaking through a translator, he has a lot to learn about obtaining permits and writing business plans. He also has had trouble finding money for the expansion, because most banks, he said, want to see that you’re established for five years before offering a loan.

This event was the first in what AIB and the Division of Latino Affairs hopes will become a more regular program, eventually hosting three to four programs a year. Leaders of this initiative also hope to take some of the feedback they’ve received from Latino business owners at these events and use it as a guide for how to help these business owners.

“I want to involve AIB as much as we can with the Latino community,” said college spokesman José de Jesús. “We believe this is a growing community, which has a lot of needs, and we need to tap into those. We need to offer them solutions and opportunities to feel comfortable in this community.”

Guerrero would like to see more collaboration among all the organizations focused on helping Latinos and is hoping to start this initiative by hosting a reception with the Division of Latino Affairs.

So far, Alianza has 50 business members and provides services such as networking evenings for Latino business owners and a business expo in the Latino corridor east of the Capitol. It also has created the Uno a Unoprogram with Bankers Trust Co., which offers bilingual business consulting at $25 an hour for the first two hours, about one-fourth the normal cost.

Leaders of these initiatives also would like to see the state government hire more bilingual employees who not only speak Spanish but understand Latino culture and can help Hispanic business owners sort out the requirements they need to comply with. Cardenas also believes that the government could do a better job of marketing new and existing services. “They could be better at going where the community is,” he said, “rather than expecting the community to come to them.”

On the other hand, Latinos tend to be hesitant to accept help. “Oftentimes you find that Latino business owners are at times wary of something being too good to be true,” Guerrero said, “and unfortunately it’s because of a reality that individual organizations out there oftentimes take advantage of those who are not bilingual or don’t know the ins and outs of business.”

In addition, Cardenas believes banks could benefit from the growing Latino population by following some credit unions’ efforts to offer financial assistance designed for the Latino business owner, which doesn’t look only at credit scores.

But in order to make these initial steps, the nation may have to overcome the political hype surrounding immigration, which Villareal says “poisons the whole air.”

“Sometimes because one member of the Latino community is bad, all are perceived as bad,” business owner Alcaras said. “We want the government and public to see Hispanics’ willingness to be successful and move forward. It’s reflected in our businesses and something that really affects the area.”