Latino-Owned Businesses Revenues Outpaced Non-Latino-Owned Firms in 2020-21, According to Biz2Credit’s Annual Study

NEW YORK, Oct. 06, 2021 (GLOBE NEWSWIRE) -- Average annual revenue for Latino-owned businesses ($258,251) in 2020-21 was $82,535 lower than their revenues the previous year ($340,787), a 24.2% decline, according to the annual Biz2Credit Latino-Owned Business Study. The analysis also found that average annual revenue for Latino-owned businesses was $45,435 greater than for non-Latino-owned companies ($212,816).

Average earnings of Latino-owned firms dropped from $218,802 in 2019-20 to $162,725 in 2020-21, a $56,077 loss of earnings, which represents a 25.6% decline. However, the Latino firms outpaced those of non-Latino-owned firms ($132,753) in 2020-21, according to Biz2Credit.

Meanwhile, the report found that average operating expenses for Latino-owned firms were lower in 2020-21, as they declined from $121,985 to $95,526. This $26,458 drop in expenses can be attributed to the COVID, since many companies expenses were dramatically reduced due to pandemic-related shutdowns.

Credit scores of Latino-owners (614) rose from 590 during the previous 12 months and were also higher than for non-Latino business owners (610) in 2020-21.

However, despite superior performance measures, the funding rate for Latino-owned companies was 34.5%, slightly lower than the funding rate for non-Latino-owned firms 36.6% in 2020-21. Further, average loan size for Latino-owned companies was $47,031, compared to $81,156 for non-Latino-owned firms in 2020-21.

“Our primary data shows relative success of Latino business owners compared to others,” said Biz2Credit CEO Rohit Arora, one of the nation’s leading experts in small business finance. “One reason is that business owners of all ethnicities struggled the pandemic, and many loan applications came from non-Latino business owners in urban areas that were hit hard by the pandemic and government-mandated restrictions on their operations.”

Biz2Credit are consistent with the Stanford Latino Entrepreneurship Initiative’s State of Latino Entrepreneurship 2020 Report, which also found that Latino-owned businesses are significantly less likely than non-Latino, white-owned companies to have loan applications approved by national banks -- despite reporting strong metrics on many key lending criteria. Further, the Stanford report said that Latinos business owners are no more likely to be high credit risk than their non-Latino white counterparts and that among the most credit vulnerable business owners (undocumented and microbusiness owners), default rates are no higher than those of non-Latinos.

According to Biz2Credit’s analysis, California was the state where the most business loan applications originated (20.7%), followed by Texas (18.0%), Florida (14.9%), New York (8.4%), Illinois (4.0%), Arizona (3.8%), New Jersey (3.4%), Georgia (2.3%), Colorado (2.1%), and Pennsylvania (1.8%) in 2020-21.

Services (except Public Administration), the largest category of businesses represented nearly 23.6% of the Latino-owned companies in the Biz2Credit study. The industries that followed were Construction (16.2%), Transportation and Warehousing (11.8%), Retail Trade (9.8%), Accommodation and Food Services (8.9%) and Professional, Scientific, and Technical Services (4.8%) Arts/ Entertainment (4.5%), Healthcare and Social Assistance (4.3%), Real Estate and Rental Leasing (2.7%) and Wholesale Trade (2.50%) in 2020-21.

"This report showcases the resiliency and dynamism of Latino entrepreneurs. COVID introduced unthinkable obstacles, but Latino small businesses still outperformed other groups," said Representative Nydia M. Velázquez (D, NJ-07), chair of the House Committee on Small Business. "Despite the success of these businesses, they consistently have a harder time obtaining funding compared to non-Latino firms. During my tenure as committee Chairwoman, I've worked to advance policies that help create a business environment where Latino entrepreneurs have access to affordable capital. This report makes it clear that Congress has more work to do to increase equity in the lending space."

Statistics of Latino Businesses

Twelve states—Arizona, California, Colorado, Florida, Georgia, Illinois, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, and Texas—had a population of 1 million or more Latino residents, according to the Census Bureau. Further, the Latino population, which includes people of any race, was 62.1 million in 2020. That figure represents an increase of 23%, while the rest of the population has grown just 4.3% since 2010.

There are an estimated 4.65 million Latino-owned companies in the U.S., making them the fastest-growing segment of U.S. small businesses, up 34% in the last 10 years, the SBA reports. The Stanford Latino Entrepreneurship Initiative’s report found that during pre-pandemic times, Latino-owned businesses generated nearly $500 billion in annual revenue and employed 3.4 million people. It also found that Latina-owned companies were more negatively impacted by the pandemic than firms owned by men and that twice as many women-led companies experienced closure, compared to male-led businesses (30% vs. 16%). Layoffs were also higher for Latina-led companies (17% vs. 12%). Only 20% of Latina-owned businesses reported that the majority of their employees could work remotely, compared to 34% of Latino-led firms and 48% of white-male-led firms.

How a Latino-Owned San Jose Salon Survived COVID

Like most salons, Limón Salon, which opened 14 years ago in San Jose, CA, struggled to survive when it was shut by COVID restrictions for eight months and limited to operating at less than 50% of capacity for several months after that. Owner Carlos Letelier, whose clients include employees of Silicon Valley tech giants Google, Apple, and Facebook, saw his revenue fall from $2.1 million in revenue in 2019 to just half of that amount in 2020.

Letelier, whose parents emigrated from Chile, was able to secure first and second round PPP loans of $275,000 each.

“I paid the staff and covered their healthcare benefits with the PPP funding,” he explained. “It helped us survive.”

During COVID, the salon also pivoted and sold professional coloring kits with curb-side delivery. Before the pandemic, he sold hair products online without much success, but during COVID, the revenues for them jumped to $20,000 per month. Now, he says his business has almost fully recovered and is on track to do $1.8 million in revenue in 2021.

Biz2Credit Latino-Owned Business Study Key findings

• California was the state where the most loan applications originated (20.7%), followed by Texas (18.0%), Florida (14.9%), New York (8.4%), Illinois (4.0%), Arizona (3.8%), New Jersey (3.4%), Georgia (2.3%), Colorado (2.1%), and Pennsylvania (1.8%) in 2020-21.
• The average credit score for Latinos was 614 in 2020-21, down slightly from 618 in 2019-20.
• The average age of business was 55 months -- one month higher on average than in the previous year.
• Services (except Public Administration), the largest category of businesses represented nearly 23.6% of the Latino-owned companies in the Biz2Credit study. The industries that followed were Construction (16.2%), Transportation and Warehousing (11.8%), Retail Trade (9.8%), Accommodation and Food Services (8.9%) and Professional, Scientific, and Technical Services (4.8%) Arts/ Entertainment (4.5%), Healthcare and Social Assistance (4.3%), Real Estate and Rental Leasing (2.7%) and Wholesale Trade (2.50%) in 2020-21.
• Average annual revenue for Hispanic-owned businesses ($258,251) was $45,435 higher than Non-Latino-owned companies ($212,816) in 2020-21.
• Average operating expense ($95,526) represents 37% of the revenue for Hispanic-owned businesses. In comparison, non-Latino-owned business expenses ($80,063) represented 38% of revenues in 2020-21.
• Average annual earnings for Latino-owned companies ($162,725) outpaced those of non-Latino-owned firms ($132,753) in 2020-21.
• Despite superior performance measures, the funding rate for Latino-owned companies was 34.5%, slightly lower than the funding rate for non-Latino-owned firms 36.6% in 2020-21.
• Average loan size for Latino-owned companies was $47,031, compared to $81,156 for non-Latino-owned firms in 2020-21.
  

For the analysis, Biz2Credit examined the financials of over 40,000 small businesses that applied for financing other than Paycheck Protection Program (PPP) loans.

Biz2Credit Latino-Owned Business vs. Non-Latino-Owned Firms (Year-over-Year Comparisons)

About the Biz2Credit Latino Small Business Credit Study

Biz2Credit, a leading online marketplace lender, analyzed the financial performance of 43,000 companies, including more than 4,000 Latino-owned firms, 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.

About Biz2Credit

Founded in 2007, Biz2Credit has arranged more than $7 billion in small business financing. The company is expanding its industry-leading technology in custom digital platform solutions for banks and other financial institutions, investors, and service providers. Visit www.biz2credit.com or Twitter @Biz2Credit, Facebook, and LinkedIn.

Media Contact: John Mooney, (908) 720-6057, john@overthemoonpr.com