Tuesday, September 26, 2023

Latino-owned companies grew in 2021-22, but still lag behind non-Latino-owned companies

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Revenues of Latino-owned companies grew but lagged behind non-Latino companies in 2021-22, according to Biz2Credit’s Annual Latino-Owned Business Survey. While a revenue gap still exists, Latino companies gained ground over non-Latino companies, whose revenues declined over the same period.

The study examined annual income, income, operating expenses, credit scores and approved loan amounts. The report looked at funding applications from small businesses with less than $10 million in annual revenue — from start-ups to established companies — across the country from July 31, 2021 to June 30, 2022.

Biz2Credit Latino-Owned Business Survey Key Findings

  • Average annual turnover for Latino companies ($538,588) was lower than that of non-Latino companies ($583,502) in 2021-22.
  • Revenue growth for Latino-owned businesses, it increased 4%, while for non-Latin-owned businesses, it shrank by 5%, narrowing the difference in average revenue to just over $45,000.
  • Average operating costs for Latino entrepreneurs was $415,101, compared to $431,680 for non-Latino entrepreneurs in 2021-2022.
  • Average Earnings (Annual Revenue – Operating Expenses) for all businesses decreased by 10.5%. Latino companies ($123,487) had lower profits in 2021-22 than non-Latino companies ($151,821).
  • Credit Scores: Based on applications submitted, the average credit score for Latino business owners dropped from 638 in 2020-21 to 634 in 2021-22, while credit scores for non-Latino businesses fell from 645 to 640.
  • The average financing amount for Latino companies ($57,470) was $24,529 less than non-Latino companies ($81,999) in 2021-22 based on funding amounts applied for and approved.
  • The state where most of the funding applications from Latino companies came from was Florida (23.3%), followed by California (18.2%), Texas (15.4%), New York (7.3%) and New Jersey (4.5%), in 2021-22, according to submitted applications.
  • The largest category of companies was Services (excluding Public Administration), which represented 18.6% of Latino companies in the Biz2Credit survey. The sectors that followed were construction (16.8%), transportation and storage (14.8%), retail (10.7%), accommodation and food services (8.6%), professional, scientific and technical services ( 5.3%), healthcare and social assistance (4.0%), real estate and rental (3.5%), wholesale (3.1%) and arts/entertainment (3.0%).
  • The average age of the company for Latino companies is lower at 61.9 months (just over five years) than for non-Latino companies at 66.8 months in 2021-22.

Latino revenues generally lagged non-Latinos, there was positive growth. Meanwhile, the revenues of non-Latino companies declined.

The proportion of Latino companies applying for financing in 2021-22 increased by 9.9%. These companies continued to face adverse conditions due to the lingering effects of the COVID-19 and disruptions to the US economy since the pandemic struck in 2020. However, Latino companies showed signs of growth in 2021-22, while non-Latino-owned companies generally saw a decline in average revenues, a sign of optimism for the future success of Latino entrepreneurs. Average sales and profits of Latino-owned companies have risen over the past year, as has average operating expenses. Latino business owner credit scores fell slightly in 2021-22, lagging behind their non-Latino counterparts.

Biz2Credit’s primary data shows the relative success of Latino entrepreneurs compared to others in the past year. Latino entrepreneurs have made significant gains compared to a year ago. One reason is that entrepreneurs of all ethnicities struggled during the pandemic, with many loan applications coming from non-Latino entrepreneurs in urban areas hard hit by both the pandemic and government-imposed restrictions on their operations.

These findings are consistent with those of the Stanford Latino Entrepreneurship Initiative State of Latino Entrepreneurship Report 2021, which also found that Latino-owned companies are significantly less likely than non-Latino white companies to have loan applications approved by national banks, despite reporting strong statistics on many key lending criteria. Furthermore, the Stanford report said that Latino entrepreneurs are probably no more at high credit risk than their non-Latino white counterparts and that among the most credit-sensitive entrepreneurs (undocumented and micro-enterprise owners), the default rate does not exceed those of non-Latinos. The Biz2Credit survey supports the finding that creditworthiness does not differ significantly between Latino and non-Latino entrepreneurs.

“The results of this study are not surprising. My district is 70% Latino, and in the past two years, Latino small business owners have fueled Miami’s unprecedented growth,” said Congresswoman Maria Elvira Salazar (FL-27). “I understand my community and we are tireless in pursuing a legacy for our families.”

“Work ethics and gratitude are bastions of our culture. Take this as proof that the American Dream can be inherited by anyone, regardless of race or origin, if they are determined to achieve it,” Salazar added. “One of my missions in Congress, as a member of the Small Business Committee , is to enforce policies that support these entrepreneurs and to reduce bureaucratic obstacles that limit their potential.”

Key Latin American Company Statistics

The Latino population, which includes people of all races, grew by 767,907 in 2021, a growth of 1.2% (62.57 million in 2020). Since 2010, the Hispanic/Latino population has grown by 23%, while the non-Hispanic/Latino population has only increased by 4.3%.

Twelve states — Arizona, California, Colorado, Florida, Georgia, Illinois, New Jersey, New Mexico, New York, North Carolina, Pennsylvania and Texas — had populations of 1 million or more Latino residents, according to the Census Bureau.

There are an estimated 4.7 million Latino businesses in the US, making them the fastest growing segment of US small businesses, up 35% over the past 10 years. SBA reports. The Stanford Latino Entrepreneurship Initiative report found that in pre-pandemic times, Latino companies generated nearly $500 billion in annual revenue and employed 3.4 million people.

The Stanford study also found that Latina-owned businesses were more affected by the pandemic than male-owned businesses and that twice as many female-run businesses were closing compared to male-run businesses (30% vs. 16 %). There were also more layoffs for Latina-led companies (17% vs. 12%). Only 20% of Latina companies reported that the majority of their employees could work remotely, compared to 34% of Latino-run companies and 48% of white male-run companies.

Biz2Credit analyzed the financial performance of more than 154,000 companies, including more than 14,000 Latino companies that submitted funding requests through the company’s online platform. All companies included in the study have annual revenues of less than $10 million. The report covered small businesses across the country, from start-ups to established companies from July 31, 2021 to June 30, 2022. To view the report, click here.

How a Latino Owned Home Health Company Found Success After the Pandemic

Sylvia Montez is the third owner of Apex Home Care, a home health care company based in San Antonio, TX. When she first entered the space, she saw that most of the offices around her were run by entrepreneurs from a different background than her own. She describes the struggle that many entrepreneurs like her face.

“As a Latina, I found that a lot of doors didn’t open and I missed a lot of opportunities,” Montez said. “Even after the pandemic, I was able to get financial support that took my business to the next level and opened many doors. It helped with marketing, not only door-to-door, but also with access to web-based technology to grow my business.”

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