Revenues of Latino-owned businesses rise, but inflation hurts profits

Income, credit scores and business age of Latino businesses have all increased over the past 12 months, but expenses have also increased, due to inflation.

Biz2Credit’s annual Latino-Owned Business Study found that while Latino-owned companies’ revenues increased (+11.6%), expenses increased more (+22.7%), resulting in lower profits in 2023-24 than in 2022-23 ($-41.1K) .

The analysis, released annually during Hispanic Heritage Month (September 15-October 15), examined the performance of small and medium-sized companies in the US from July 1, 2023 to June 30, 2024. It looked at financial indicators including annual revenue, expenses operating, business age and credit scores of Latino and non-Latino companies.

Income for small businesses increased overall, mainly due to inflation. Profits were down overall, but the average decline for Latino businesses was not as sharp as for non-Latino businesses. Latino-owned firms’ earnings performance outperformed others.

1. To average annual income of Latin businesses GROWING by 11.6% from $601,636 in 2022-23 to $671,360 in 2023-24. Meanwhile, average annual revenue for non-Latino businesses increased 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 fallen from $113,268 in 2022-23 to $72,168 in 2023-24, a decrease of $41,100. Meanwhile, non-Latino owned businesses fell from $159,365 to $94,237, a decrease of $65,128. Overall, revenues across all businesses were down 40% year over year.

3. Operating expenses for Latino-owned firms GROWING by 22.7% from $488,368 in 2022-23 to $599,192 in 2023-24, resulting in gains dwindle of 36.3% for Latin firms. Meanwhile, operating costs for non-Latin companies GROWING 28% from $507,849 in 2022-23 to $649,790 in 2023-24, resulting in a 40.9% Falling in profits.

4. To Average Personal Credit Score (FICO)* for Latin business GROWING from 641 in 2022-23 to 647 in 2023-24. In comparison, the non-Hispanic business personal loan score rose from 648 to 659 over the same time period.

5. To business age for Latin business GROWING 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. To average approved funding amount for Latin businesses pink 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, down from $75,912 in 2022-23.

7. Percentage of funding applications submitted by Latino businesses, relative to the total number of applications submitted, increased slightly from 14.8% in 2022-23 to 15% in 2023-24. In 2024, funding applications from Latino businesses grew 14.13% (year-over-year) compared to 2023. This outpaced applications from non-Latino-owned businesses, which grew 12.78% year-over-year .

8. To financing rate for Latino businesses it is 32%, slightly higher than the rate of 31% for non-Latino businesses. The average amounts financed were $62,371 for Latino-owned businesses and $76,503 for non-Latino firms.

9. Construction is calculated for the largest industry category of Latin companies examined in the study, followed by Other Services (except Public Administration), Accommodation and Food Services, Retail Trade, and Transportation and Warehousing.

10. From COUNTRYnearly a 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 show that inflationary pressures significantly hurt the profits of all small businesses last year, and Latino-owned firms were not immune. As a result, earnings for Latino firms seeking business financing fell an average of 36%.

Many factors combined, including rising labor costs, rising fuel prices and general inflation. Rents continue to rise dramatically, especially for businesses located in cities. Meanwhile, insurance costs have risen. Rising labor, rent and insurance costs are inevitable and unfortunately there doesn’t seem to be an end in the near future. They are hurting small businesses significantly.

Further, high interest rates also squeezed companies that borrowed for working capital or expansion. The good news is that the rate of inflation has eased a bit and the Federal Reserve has lowered interest rates, thereby lowering the cost of capital.

The impact of Latino-owned businesses on the US economy

The US is home to over 63 million Latin Americans, who make up approximately 19% of the country’s population. Latinos contribute $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).

Furthermore, Latino entrepreneurs are starting businesses at more than twice the rate of the general US population. This growth has resulted in a higher percentage of new businesses being owned by immigrants overall. In 2023, immigrants were responsible for 36% of new business startups, up from 25% in 2019, according to the US Census Bureau.

Latino immigrants significantly outnumber other groups in business ownership, and they account for 52% of all Latino-owned businesses. In contrast, only 7% of white-owned employer businesses are owned by immigrants, according to SLEI. Further, Latino-owned businesses will revolutionize the US economy, as Latinos are projected to make up 29% of the population by 2050 and contribute $1.4 trillion to the US economy, according to JPMorgan Chase.

As the Latino population grows, it increasingly becomes an indicator of the health of the US economy. Business owners are hoping that as inflation begins to ease, their revenues may be on the rise again.