Latino Small Business Study 2019

October 14, 2019

Earnings

Earnings of Latino-Owned Businesses Jumped 46 Percent During Past 12 Months, According to Biz2Credit’s Annual Study

Growth Outpaces Non-Latino Owned Businesses with Economy at Full Strength

Average Annual Revenue

Average Annual Revenue

The average revenue of Latino-owned businesses improved 46.5% in 2019, increasing to $479,413 from $327,189 in 2018, according to Biz2Credit’s annual study. Meanwhile, the number of credit applications from Latino-owned businesses increased by 23% over the past 12 months.

Average Credit Score

The study, which examined the primary financial information submitted by 3,000 Latino-owned businesses on BizCredit’s online platform, also revealed that while revenues climbed, the average credit scores Latino-owned businesses dipped to 588 from 594 last year.

Average Credit Score

Average Annual Revenue

Average Annual Revenue

Average annual revenue for Hispanic-owned businesses ($479,413) was $25,067 lower than
Non-Latino-owned companies ($590,110) in 2018-19.

Average Operating Expense

Average Credit Score

Average operating expense represents 45% ($215,846) of the Average Annual Revenue ($479,413) for Hispanic-owned
businesses, which was 43% ($140,806) in 2018. The rise of nearly 3 percent is observed in average operating expense
of non-Latino businesses which is 40.6% (2019) from 38% in 2018.

Latino-owned businesses have grown 31.6% since 2012, and our research finds that revenues of Latino-owned companies jumped 23% from 2017-18,” said Rohit Arora, CEO of Biz2Credit, who oversaw the research. “Cost management is a challenge for young and growing firms, which can factor into the dip in credit scores. Latino businesses are thriving and expanding, and they help contribute to the overall strength of the U.S. economy.

"The growth of Latino businesses is undeniable and will undoubtedly increase as this important group becomes a larger section of the population. By 2050," Latinos are expected to comprise almost 30% of the population, compared to 18% today," said Manuel Chinea, COO, Popular Bank. "We see first-hand the enormous contribution these businesses make to our economy and communities, and Popular Bank works with them as the complexity of running their business increases,” Chinea added.

Top 5 states for Hispanic owned

Small Business Loan applications

Top 5 states for Hispanic

Top Industries for

Hispanic enrepreneurs

Accommodation and Food Services remains the largest category of businesses represented nearly 18% of the Hispanic-owned companies in the study. Services (except Public Administration) were 17%, Construction remains close to 15%, Retail Trade remains almost unchanged to 13%, Transportation and Warehousing 8% were the four next most common industries for Latino entrepreneurs.

Top Industries for
Key findings:
  • Average Annual Revenue of Latino-owned business increased to $479,413 in 2019, with an improvement of 46.5% from $327,189 in 2018.
  • Average annual revenue for Latino-owned businesses ($479,413) was $25,067 lower than Non-Latino-owned companies ($590,110) in 2018-19.
  • The number of credit applications from Latino-owned businesses increased by 23% over the past 12 months. However, they comprise only 9% of the total number of applications submitted last year.
  • Average operating expenses represents 45% ($215,846) of the Average Annual Revenue ($479,413) for Latino-owned businesses, which was 43% ($140,806) in 2018. The rise of nearly 3 percent is observed in average operating expense of non-Latino businesses which is 40.6% (2019) from 38% in 2018.
  • The average credit score for Latinos slightly dipped from 594 in 2017-18 to 588 last year.
  • California was the state where the most loan applications originated (23.5%), followed by Texas (20%), New York (7%), Florida (6%) and New Jersey (5%).
  • Accommodation and Food Services remains the largest category of businesses represented nearly 18% of the Latino-owned companies in the study. Services (except Public Administration) were at 17%, Construction came in at close to 15%, Retail Trade was 10%, and Transportation and Warehousing represented 8% of the businesses.

“While generally, the picture has been rosy for Latino businesses, it is a little concerning that credit scores dropped from the previous year,” Arora said. “This would seem to indicate that business owners may be using their own personal credit cards to fund their business growth if their companies did not qualify for loans. When credit scores are less than 600, it is hard to get traditional bank loans.”

Rafael Diaz owns a thriving restaurant and catering business in Geneva, New York (population: 13,000), called El Morro Restaurant. The eatery features authentic Puerto Rican recipes he learned from his mother as a child, when he was the youngest of 23 siblings. Among the top-selling menu items are pulled pork, arroz con pollo, and beef and chicken empanadas, and fried plantains, and Mexican dishes.

“My customers appreciate that the recipes are authentic and the food is cooked fresh,” said Diaz, who is originally from San Juan, Puerto Rico, and has operated El Morro successfully for five years in an area where Latinos comprise less than 10% of the local population.

With Biz2Credit’s help, Diaz applied for funding and secured cash advances of $8,000 and $7,000, which he used for working capital and for equipment purchases that he used to build out and decorate the restaurant, located on heavily traveled Route 14, which connects to the New York State Throughway in the Finger Lakes winemaking region.

This year, when the sponsor of the town’s local Latino festival (Sept. 13-15) dropped out, he stepped in. He believes his community involvement helps his business and is proud that he has been recognized by the town for his efforts.

Estimates from the Stanford Latino Entrepreneurship Initiative (SLEI) found that only 3% of Latino-owned businesses grow to $1,000,000 or more in annual revenues, compared to 6% of white-owned businesses. Despite impressive numbers of startups, Latino-owned firms tend to stay smaller longer.

Loan Access

Latino companies are seeking funding for both long-term needs, including commercial real estate and equipment purchases, as well as shorter, cash flow-related issues.

Many Latino businesses apply for SBA microloans (amounts up to $50,000) that are offered by regional and community banks with government guarantees, which encourage lending to companies that otherwise might not qualify for bank loans. For companies that need larger amounts, SBA Community Advantage Loans provide up to $250,000 in funding to companies located in underserved areas.

About the Biz2Credit Latino Small Business Credit Study Biz2Credit, a leading online marketplace lender, analyzed the financial performance of 2900 Latino-owned businesses and 32000 other companies that submitted funding requests through the company’s online marketplace. All companies included in the survey have less than 250 employees and less than $10 million in annual revenues. The report covered small businesses across the country, from start-ups to established companies. Outliers have been removed from the dataset to avoid skewed results.

About the Biz2Credit Latino Small Business Credit Study, Biz2Credit, a leading online marketplace lender, analyzed the financial performance of 2900 Hispanic-owned businesses and 32000 other companies that submitted funding requests through the company’s online marketplace. All companies included in the survey have less than 250 employees and less than $10 million in annual revenues. The report covered small businesses across the country, from start-ups to established companies. Outliers have been removed from the dataset to avoid skewed results.