Latino-Owned Business Revenues Grow, But Inflation Hurts Earnings

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

Biz2Credit’s annual 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 analysis, released each year during Hispanic Heritage Month (Sept. 15 – Oct. 15) examined the performance of small to midsized companies in the U.S. from July 1, 2023, to June 30, 2024. It looked at 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. Earnings performance of Latino-owned firms outperformed the others.

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.

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.

The numbers prove that inflationary pressures significantly hurt the earnings of all small businesses in the last year, and Latino-owned firms were not immune. Profits for Latino-owned firms seeking business financing were down 36% on average, as a result.

Many factors combined, including increased labor costs, rising fuel prices, and overall inflation. Rents continue to climb dramatically, especially for businesses located in cities. Meanwhile, insurance costs have skyrocketed. Rising costs of labor, rent, and insurance are unavoidable, and there unfortunately does not seem to be an end in teh near future. They are significantly hurting small businesses.

Further, high interest rates also pinched companies that borrowed money for working capital or expansion. 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.

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.

As the Latino population grows, it becomes more and more of an indicator of the health of the U.S. economy. Business owners are hopeful that with inflation starting to ease, their revenues may again be on the upswing.