Latino owned businesses are rising on the tide of the improved national economy with improved revenues. However, they need to leverage business credit better to keep their credit scores from dipping.
2017 Biz2Credit Latino Small Business Credit Study
Last year’s falling Latino credit scores (down from 595 to 592) were in contrast to the higher revenues for 2016 (averaging $258,702). These were the big takeaways from the annual Biz2Credit Latino Small Business Credit Study.
The study also found there were some common industries where Latino business ownership seemed concentrated. These were services, retail, construction, food services and accommodation as well as transportation and warehousing. The states leading in loan applications from Latino businesses included California just over 25 percent and Texas at 20.4 percent.
Rohit Arora, CEO of Biz2Credit, told Small Business Trends there was a reason for the credit drop beyond the payment history.
“Latinos have not had great access to business credit, thus they leverage their personal credit. They may be putting costs on credit cards that come with higher interest rates than loans,” he said. “The problem is that once you go about 50 percent utilization, your credit score drops — even if you are paying on time.”
Latinos own over four million businesses now in the U.S., according to the report. They contribute over $668 billion to the American economy every year according to the U.S. Latino Chamber of Commerce. Arora says having Latinos apply through traditional business credit channels is important.
“A lot of Latino-owned businesses are in construction and transportation/logistics, and retail food businesses. The key is Latino-owned businesses need to apply for more formal business credit. Construction and retail are not traditionally funded by banks, and many of the business owners do not have a lot of experience in dealing with formal business credit,” he said.
The study looked at 2000 Latino owned businesses and 25,000 other companies with less than 250 employees and annual revenues less than $10 million.
[“Source-smallbiztrends”]
