There is no faster-growing group of entrepreneurs in the United States than Hispanic business owners.
Over the last decade, Hispanic-owned companies have grown at a rate 15 times higher than that of all other firms, according to the U.S. Hispanic Chamber of Commerce.
In the mid-Atlantic region — consisting of New York, New Jersey and Pennsylvania — there has been a 20% increase in Hispanic-owned companies in the years between 2012 and 2015.
Last year, Hispanic entrepreneurs — represented by more than 4 million companies nationwide — contributed more than $600 billion in revenue to the national economy.
Yet despite these recent developments in business growth, they are still behind in key financial performance and business factors in their companies.
A new study of more than 25,000 companies across the country that applied for a small business loan on Biz2Credit’s platform, revealed that Hispanic-owned companies had average annual revenues of $202,327 over the last 12 months, while non-Hispanic-owned businesses had average annual revenues of $206,855 during the same period.
In New York, the numbers in all the categories of data were higher. The average annual revenue for an Hispanic-owned firm was $311,194, as opposed to the national figure of $202,327.
Meanwhile, non-Hispanic-owned businesses in New York had an average revenue of $770,379. The average operating expenses for New York’s Hispanic-owned businesses was $145,929, compared to $437,010 for non-Hispanic-owned companies.
These results aren’t all that surprising since the average age of a business was 46 months (a little less than four years) for Hispanic-owned companies was lower than the average age of non-Hispanic-owned firms at 63 months (a little more than five years).
The younger age of business and lower revenues and expenses are indicators of start-up growth.
Among the most popular categories for Hispanic-owned companies in New York are:
- Services: 24.4%
- Retail Trade: 16.9%
- Accommodation and Food Companies: 16.9%
- Construction: 13.4%
The average credit score for Hispanic entrepreneurs was 609, slightly above the critical 600 benchmark that many banks use before they even consider processing a loan request. (For non-Hispanic-owned companies in New York, the average credit score was 625.)
Having adequate access to capital is essential in the start-up phase for growth, and low credit scores can hinder that ability to secure a loan at attractive terms.
The encouraging news is that there was a 68.7% increase in small business loan applications by Hispanic entrepreneurs over the last 12 months.
Much of that growth came from the New York metropolitan area, which has a Latino population of approximately 2.3 million, the largest in the U.S., according to HispanicResearch.com.
Fortunately, the community benefits from non-profit organizations such as the New York State Coalition of Hispanic Chamber of Commerce (NYSCHCC), which offer valuable resources to foster the growth and development of Hispanic-owned companies.
By 2050, the Hispanic population in the U.S. is expected to reach 106 million, approximately double today’s figure, according to the latest Pew Research.
As this population continues to grow substantially, their importance in company formation and job creation involvement in the economy will be even more vital.
By Rohit Arora [Viva NY]