Analysis Examined Average Annual Revenue, Credit Scores and Operating Expenses
Latino entrepreneurs faced challenges in securing financing and are more likely to borrow money from high interest, non-bank lenders, according to our study that looked at annual revenue, credit scores, age of business (in months), and operating expenses.
- Criteria # Completed Applications
- Hispanic 1034
- Non Hispanic 16093
- Total 17127
- Criteria Avg Annual Revenue
- Hispanic 69,518.56
- Non Hispanic 86,501.47
- Total 85,476.17
- Criteria Avg Credit Score
- Hispanic 611.7
- Non Hispanic 622.3
- Total 621.6
- Criteria Avg Operating Expenses
- Hispanic 20,981.19
- Non Hispanic 29,455.54
- Total 28,943.89
- Criteria Avg Age of Business
- Hispanic 24
- Non Hispanic 24
- Total 24
- Criteria Avg Age of Business
|# Completed Applications||1034||16093||17127|
|Avg Annual Revenue||69,518.56||86,501.47||85,476.17|
|Avg Credit Score||611.7||622.3||621.6|
|Avg Operating Expenses||20,981.19||29,455.54||28,943.89|
|Avg Age of Business
Average Annual Revenue for Latino-owned businesses was $69,518.56, while for non-Latino-owned businesses, the figure was $86,501.47. Meanwhile, the Average Credit Score for Latino-owned businesses was 611.7, compared to 622.3 for all others. Average Operating Expenses were lower at $20,981.19, contrasted with $29,455.54 for non-Latino businesses.
"Even when the age of business -- how long a company has been in operation -- was the same, the average revenue and credit scores for Latino-owned companies were often lower than those of non-Latino businesses," said Biz2Credit CEO Rohit Arora, one of the nation's leading experts in small business finance. "The result is that Latino entrepreneurs face greater scrutiny from banks and often have to turn to alternative lenders that charge much higher interest rates."
The Top 5 States for Latino-Owned Small Business Loan Applications -- The top five states California (20.3%), Florida (20.2%), Texas (14%), New York (11.7%), and New Jersey (4.2%) -- represented more than 70 percent of the loan requests made by Latinos in the past two years.
For this analysis, we defined "small businesses" as companies having fewer than 250 employees or less than $10 million in annual revenues. We will host a webinar on Tuesday, Sept. 30th at 3:00 p.m. (EDT) detailing the results of its report with some of the nation's top experts in small business finance and Latino entrepreneurship:
- Anita Campbell (moderator), founder of Small Business Trends, a top resource for entrepreneurs
- Rohit Arora, CEO of Biz2Credit, one of the nation's top experts in small business finance
- Hector Barreto, Chairman of The Latino Coalition and former SBA Administrator (2001-06)
- Paul Quintero, CEO of microlender Accion East and Online
"The young generation of Latinos -- both immigrants and 1st or second generation Americans -- are very entrepreneurial," said Hector Barreto, Chairman of The Latino Coalition. "Where I see a need for improvement is that we need to mentor them better, to create role models in the community and help them take their companies to higher levels. I'd also like to see more Latinos enter the booming technology sector in Silicon Valley and elsewhere."
"Many are home-based, which saves a lot of money on rent and lowers operating expenses," added Arora, who oversaw the research. "In any ethnic community, often family-run, they often don't run a formal payroll. Many a times they are less integrated with the formal economy. Many times the business is conducted in cash, and the owners may not have business credit cards or lines of credit. Latinos are hardworking, but many are not running large profitable businesses as yet."
About the Biz2Credit Latino Small Business Credit Study
Biz2Credit analyzed the financial performance of more than 1,000 Latino-owned businesses with less than 250 employees and less than $10 million in annual revenues from across the country that have been in operation for more than 1 year, as well as startups.