Profits of Latino-owned businesses jump 46% in the past 12 months
The average income of Latino-owned businesses improved 46.5% in 2019, to $ 479,413 from $ 327,189 in 2018, according to the annual Biz2Credit study. At the same time, the number of credit applications from Latino-owned businesses has increased by 23% in the past 12 months.
The study, which examined key financial information submitted by 3,000 Latino-owned businesses on Biz2Credit’s online platform, also found that while incomes rose, the average credit scores of Latino-owned businesses fell to 588 from 594 last year.
Latino-owned businesses have grown 31.6% since 2012, and our research reveals that Latino-owned businesses’ revenues jumped 23% from 2017-18. Managing costs is a challenge for young and growing businesses, which can impact downward credit ratings. Latin American businesses are thriving and expanding, and they contribute to the overall strength of the US economy.
Manuel Chinea, COO of Popular Bank agrees.
“The growth of Latin American businesses is undeniable and will undoubtedly increase as this important group becomes a larger part of the population. By 2050, Latinos are expected to represent nearly 30% of the population, up from 18% today, ”Chinea said. “We see firsthand the huge contribution these companies make to our economy and our communities, and Popular Bank is working with them as the complexity of running their business increases. “
Other key findings from the Biz2Credit study on Latin American companies:
- Average annual income of Latino-owned businesses grew to $ 479,413 in 2019, with a 46.5% improvement compared to $ 327,189 in 2018.
- The number of loan applications from Latino-owned businesses increased by 23% in the past 12 months. However, they only represent 9% of the total number of requests submitted last year.
- The average credit score for Latinos slightly dipped in 594 in 2017-18 to 588 Last year.
- Accommodation and food services remains the largest category of companies represented near 18% of Latino-owned businesses in the study. Services (except public administration) accounted for 17%, construction nearly 15%, retail trade was 10%, and transportation and warehousing accounted for 8% of businesses.
- Average annual income for Latino-owned businesses ($ 479,413) was $ 25,067 less than non-Latino businesses ($ 590,110) in 2018-19.
- Average operating expenses represents 45% ($ 215,846) of the average annual income ($ 479,413) for businesses owned by Latinos, which was 43% ($ 140,806) in 2018. The increase of almost 3% is seen in expenses operating average of non-Latino companies which are 40.6% (2019) against 38% in 2018.
- California was the state where the most loan applications come from (23.5%), followed by Texas (20%), New York (7%), Florida (6%) and New Jersey (5%) .
In this economy, Latin American businesses across the country have thrived. However, it is a bit worrying that credit scores have gone down from the previous year. This would seem to indicate that business owners could use their own personal credit cards to finance the growth of their business if their business did not qualify for loans. When credit scores are below 600, it is difficult to get traditional bank loans or even SBA loans. In such cases, business owners may have to borrow from non-bank lenders, such as merchant cash advance companies.
Merchant cash advance companies provide an initial sum of money in exchange for a percentage of the borrower’s future sales on a daily basis. Most term loans and SBA loans are repaid monthly in a fixed sum. With a merchant cash advance, the borrower makes daily payments (plus interest and fees), until the advance is repaid.
Latin American companies are seeking financing both for long-term needs, including purchases of commercial real estate and equipment, as well as for shorter cash flow issues.
Many Latin American businesses apply for SBA microloans (up to $ 50,000) which are offered by regional and community banks with government guarantees, which encourages lending to businesses that might otherwise be not be eligible for bank loans. For businesses that need larger amounts, SBA Community Advantage Loans provide up to $ 250,000 in financing to businesses located in underserved areas.
How Important Are SBA Loans?
This week, the agency announced its Loans figures for fiscal year 2019 showing that it has guaranteed more than $ 28 billion to entrepreneurs who otherwise would not have access to capital to start, develop or expand their small businesses.