Revenues of Latino-Owned Businesses Grew Last Year, But Earnings Fell Due to Rising Expenses, per 2024 Biz2Credit Study

Revenues, credit scores and age-of-business of Latino-owned businesses all increased during the past 12 months, but expenses also rose.

/EIN News/ -- NEW YORK, Oct. 01, 2024 (GLOBE NEWSWIRE) -- Biz2Credit’s 2024 Latino-Owned Business Study found that while revenues of Latino-owned companies increased (+11.6%), expenses rose more (+ 22.7%), resulting in lower earnings in 2023-24 than in 2022-23 (-$41.1K).

The annual study examined the performance of Latino-owned small to midsized companies -- from early stage to established companies -- in the U.S. from July 1, 2023, to June 30, 2024. It examines financial indicators including annual revenue, operating expenses, age of business, and credit scores of both Latino-owned and non-Latino-owned companies.

“Revenues for small businesses rose overall, largely because of inflation. Earnings were down overall, but the average drop for Latino-owned businesses was not as sharp as for non-Latino-owned businesses,” said Rohit Arora, CEO of Biz2Credit and Biz2X, who oversaw the research. “When we analyzed earnings performance, Latino-owned businesses outperformed the others.”

Key findings: Latino-owned vs. non-Latino-owned Businesses

1. The average annual revenue of Latino-owned businesses increased by 11.6% from $601,636 in 2022-23 to $671,360 in 2023-24. Meanwhile, the average annual revenue for non-Latino Businesses increased by 11.5% from $667,204 in 2022-23 to $744,027 in 2023-24.
2. Average earnings (Annual Revenue - Operating Expenses) for Latino-owned businesses dropped from $113,268 in 2022-23 to $72,168 in 2023-24, a drop of $41,100. Meanwhile, non-Latino-owned businesses declined from $159,365 to $94,237, a drop of $65,128. Overall, earnings across all businesses decreased by 40% year over year.
3. Operating expenses for Latino-owned firms increased by 22.7% from $488,368 in 2022-23 to $599,192 in 2023-24, resulting in earnings decrease of 36.3% for Latino firms. Meanwhile, operating costs for non-Latino-owned companies increased 28% from $507,849 in 2022-23 to $649,790 in 2023-24, resulting in a 40.9% drop in earnings.
4. The average personal (FICO) credit score* for Latino owned business increased from 641 in 2022-23 to 647 in 2023-24. In comparison, the personal credit score for non-Latino-owned business increased from 648 to 659 during the same timeframe.
5. The age of business for Latino-owned business increased from 54 months (4.5 years) in 2022-23 to 64 months in 2023-24. This is an indication of the staying power of Latino-owned companies. In comparison, non-Latino-owned businesses were in operation for an average of 79 months (slightly more than 6.5 years).
6. The average approved funding amount** for Latino-owned businesses rose from $55,396 in 2022-23 to $75,680 in 2023-24. The amount was $16,662 lower than that for non-Latino-owned businesses, which had $92,342 in 2023-24, up from $75,912 in 2022-23.
7. The percentage of financing applications submitted by Latino-owned businesses, relative to the total number of submitted applications, increased slightly from 14.8% in 2022-23 to 15% in 2023-24. In 2024, financing applications by Latino-owned businesses increased 14.13% (year-over-year) compared to 2023. That surpassed applications by non-Latino owned businesses, which grew 12.78% year-over-year.
8. The funding rate for Latino-owned businesses stands at 32%, slightly higher than the 31% rate for non-Latino-owned businesses. The average funded amounts** were $62,371 for Latino-owned businesses and $76,503 for non-Latino-owned firms.
9. Construction accounted for the largest industry category of Latino-owned companies examined in the study, followed by Other Services (except Public Administration), Accommodation and Food Services, Retail Trade, and Transportation and Warehousing.
10. By state, nearly one-quarter (24%) of funding requests from Latino-owned firms came from Florida, followed closely by California (19.4%), and then Texas, New York, and New Jersey.

“Inflationary pressures significantly hurt the earnings of all small businesses in the last year, and Latino-owned firms were not immune. While their revenues rose in 2023-24, their expenses increased almost twice as much,” said Arora. “Profits for Latino-owned companies seeking financing were down 36% on average, as a result.”

“Many factors combined, including increased labor costs, rising fuel prices, and overall inflation. High interest rates also pinched companies that borrowed money for working capital or expansion,” Arora added. “The good news is that the growth rate of inflation has been easing a bit, and the Federal Reserve has lowered interest rates, thus bringing down the cost of capital.”

*Average credit score is derived from the personal FICO credit score of business owners
** Average approved funding amounts and average funding sizes are determined by the qualifications of funding applications, including FICO scores and business revenues. any discrepancies are driven by these financial metrics.

Impact of Latino-owned businesses on the U.S. Economy

The U.S. is home to over 63 million Latinos, accounting for roughly 19% of the nation's population. Latinos contribute a staggering $3.2 trillion to the economy and own nearly 5 million businesses that collectively generate more than $800 billion annually, according to the Stanford Graduate School of Business Latino Entrepreneurship Initiative (SLEI).

Further, Latino entrepreneurs are starting businesses at more than twice the rate of the general U.S. population. This increase has led to a higher proportion of new businesses being owned by immigrants overall. In 2023, immigrants were responsible for 36% of new business launches, up from 25% in 2019, according to the U.S. Census Bureau.

Latino immigrants significantly outpace other groups in business ownership, and they comprise 52% of all Latino-owned businesses. In contrast, only 7% of White-owned employer businesses are immigrant-owned, according to the SLEI. Further, Latino-owned businesses are set to revolutionize the U.S. economy, as Latinos are projected to make up 29% of the population by 2050 and contribute a staggering $1.4 trillion to the U.S. economy, according to JPMorgan Chase.

Methodology

Biz2Credit’s 2024 Latino-Owned Business Study is an annual review of the financial performance of Latino-owned small to midsized businesses in the United States, categorized by revenue generation. The study reviewed over 121,000 funding requests from both Latino-owned and non-Latino-owned businesses across all 50 states and 20 industries by analyzing credit inquiries and applications from July 2023 to June 2024.The analysis focused on variables such as submitted applications, annual revenue, operating expenses, business age, personal credit (FICO) scores*, funding rates, and average loan sizes. The study offers insights into the performance of Latino-owned private companies over the past year, using 2022-2023 data to compare average revenue and expenses year-over-year for 2023-2024.

About Biz2Credit
Founded in 2007, Biz2Credit has helped thousands of companies access more than $8 billion in small business financing. The company is expanding its industry-leading Biz2X^® technology in custom digital platform solutions for banks and other financial institutions, investors, and service providers. Visit www.biz2credit.com, Instagram, Facebook, and X (formerly Twitter).

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