2018 Latino-Owned Business Study

September 12, 2018

Growth Outpaces Non-Latino Owned Businesses

Growth Outpaces Non-Latino Owned Businesses

NEW YORK, September 13, 2018 - A new study of more than 28,000 small and medium-sized companies by Biz2Credit found that average annual revenue of Latino-owned business increased from $258,702 in 2016-17 to $327,189 in 2017-18, an increase of 26.5 percent. The study also revealed that the number of credit applications from Latino-owned businesses rose 22 percent over the past 12 months and that the average credit score for Latinos increased from 592 in 2017 to 594.

"Latino-owned companies had very strong revenue figures -- 26.5% growth -- in 2017-18," said Rohit Arora, CEO of Biz2Credit, who oversaw the research. "Much of it can be attributed to the entrepreneurial spirit that immigrants bring to the country and the overall strong U.S. economy. The rising tide raises all the boats."

"Success breeds confidence, and applications for small business loans by Latino-owned companies rose 22%," added Arora, one of the leading experts in small business finance in the U.S. "Further, they have been successful in securing small business loans."

" According to our data, 27% of Latino business owners were approved for funding during the last 12 months. It's roughly the same percentage as the approval rates for non-Latino-owned businesses. The funding gap is shrinking."

Biz2Credit's Top 5 states for Latino-owned small business loan applications were California, Texas, New Jersey, Florida, and New York. These states combined represented 60 percent of the applications for loans for Latinos on the platform over the past 12 months. Two states - California and Texas - combined for more than 40 percent of the Latino small business loan requests in 2017-18.

Top 5 states

Latino-owned small business loan

1 California
2 Texas
3 New Jersey

4 Florida
5 New York

Combined represented 60 percent of the applications for loans for Latinos on the platform over the past 12 months.

"As a Latino business owner, I have seen such an increase in the Hispanic population over the past 20 years. This growth has afforded Latino business owners with a great deal of confidence and has made the general market take our community seriously," said radio station owner Victor Canales of VCMG Live."

"The Latino business community now represents billions in income despite barriers," added Canales, well known to radio listeners in the New York market as Vic Latino. "Constraints -- whether political, financial or cultural -- still hold back Latino entrepreneurs from enhancing their companies."

Accommodation and Food Services was the largest category businesses and represented nearly 20% of the Latino-owned companies in the study. Other Services (except Public Administration) followed at 16.3%, followed by Construction (14.4%), Retail Trade (13.3%), and Transportation and Warehousing (6.9%).

"Biz2Credit's study confirms what we have known for some time; the growing contribution and importance of the Latino-owned businesses in our marketplace. For years, we have been strong supporters of their entrepreneurial needs and believe it is critical to enable their business growth with comprehensive product offerings, tools, education and services," said Manuel Chinea, COO of Popular Bank. "Providing access to better and faster financing options will allow Latino-owned businesses to build upon this momentum."

Latino vs Non-Latino Owned Business - 2017 vs 2018

Key findings:

Average annual revenue of Latino-owned business increased to $327,189 in 2017 from $258,702 the previous year, an improvement of 26.5 percent.
The number of credit applications from Latino-owned businesses increased 22% over the past 12 months.

The average credit score for Latinos increased from 592 last year to 594 this year.
Accommodation and Food Services is the largest category of businesses and represented nearly 20% of the Latino-owned companies in the study. Other Services (Except Public Administration) businesses followed at 16%.

Comparing Latino-Owned vs. Non-Latino-Owned Companies

Latinos accounted for about eight (8) percent of the 28,000 completed credit applications on Biz2Credit.com in 2018.
Average annual revenue for Latino-owned businesses ($327,189) was $25,067 lower than Non-Latino-owned companies ($352,256) in 2017-18.
Average operating expense represents 43% ($140,806) of the Average Annual Revenue ($327,189) for Latino-owned companies. The figure was 33.7% in 2017. Average Operating Expense for non-Latino businesses was 38% ($133,834) of their average revenue. It was 39.9% in 2017.
Average net income for Latino-owned businesses increased to $186,383 in 2017-18 from $171,460 in 2016-17.

Average credit score: On average, the credit score for Latino-owned businesses (594) were 14 points lower than those of Non-Latino-owned businesses (608) in 2018. This is due, in part, to higher cost structures and track histories of payment, which are improving but not yet where they need to be, according to Biz2Credit CEO Rohit Arora.
Average age of business (in months) for Latino-owned businesses was 53 months (about 4.5 years) in 2017-18. This is an indicator that companies owned by Latinos are viable in the longer term. The average age of Latino-owned businesses (53 months) is 3 months shorter than that for Non-Latino owned businesses (56 months) in 2018.

"There are over 57 million American citizens of Latino heritage, and that figure is projected to double by 2060, according to the U.S. Census Bureau," said Arora, one of the nation's leading experts in small business finance. "Small business financing - startup funding, working capital, or financing to expand - has to be available for this country's 4.4 million Latino-owned firms to flourish."

A cause for concern is the relatively low credit scores for Latino-owned businesses.

"Companies that are successful in securing funding should have a credit score of at least 650," Arora said. "Despite their revenue growth over the past 12 months, the average credit score for Latino-owned companies in our study was 594. This makes is difficult to secure financing at reasonable rates. Companies with credit scores below 600 must work to raise those scores. Two ways are to become better at paying bills in a timely manner and lowering their credit utilization."

Latino-owned companies in the U.S. - currently estimated at nearly 4.4 million, according to the U.S. Latino Chamber of Commerce - contribute over $668 billion to the American economy every year. In fact, the five-year average growth rate in the number of Latino firms has been at double or triple that of the national average for the past 15 years, according to the Stanford Latino Entrepreneurship Initiative (SLEI), which surveyed nearly 5,000 Latino business owners in 2016.

About the Biz2Credit Latino Small Business Credit Study

Biz2Credit, a leading online marketplace lender, analyzed the financial performance of more than 2,300 Latino-owned businesses and 25,000 other companies with less than 250 employees and less than $10 million in annual revenues from across the country from start-ups to established businesses.

About Biz2Credit

Founded in 2007, Biz2Credit has arranged more than $2 billion in small business financing and has several times been named to Crain's New York's Fast 50 and was ranked among the top 200 fast-growing companies on Deloitte's 2017 Technology Fast 500. Biz2Credit is expanding its industry-leading technology in custom digital platform solutions for leading banks and other financial institutions, investors and service providers in the U.S. Visit www.biz2credit.com or follow Biz2Credit on Twitter: @Biz2Credit, Facebook, and LinkedIn.