COSTA MESA, Calif.—Compared with the overall small business population, minority-owned small businesses are slightly behind when it comes to credit management, a new study shows.
A report from Experian reveals that the average business credit score for a minority-owned small business is 49.7, nearly five points lower than the average for the general small business population. As a consumer, the average credit score for a minority small business owner is 707, 15 points lower than the overall average for small business owners.
“Given that minority-owned small businesses make up such a small percentage of the general small-business population — approximately 21% — industry professionals and regulators are becoming more interested in helping this segment grow and succeed,” said Pete Bolin, director of consulting and analytics for Experian.
In terms of payment behavior, 1.2% of minority small business owners have at least one business credit card account that is severely delinquent (91-plus days), while 8.3% have at least one consumer credit card account that is severely delinquent (90-plus days). Comparatively, 1.1% of the general small business owner population have at least one severely delinquent business credit card account and 6.8% have at least one severely delinquent consumer account.
Experian’s analysis also identified the most popular industries for minority-owned businesses. The analysis shows that the industry of choice was eating places, which accounted for 7.3% of minority-owned businesses, followed by beauty shops (5.8%), legal services (2.9%), business services (2.7%) and real estate (2.5%).
Regardless of industry, the analysis found that the average consumer income for these business owners is $92,489. This is similar to the general small-business owner population, which has an average consumer income of $92,338. From an education perspective, 65.6% of minority small-business owners have at least some college experience, just slightly less than the general business population (68.3%).
“Gaining insight into the trends and behaviors of the small-business community is imperative given its importance to the growth and success of our overall economy,” continued Bolin. “While a person’s ethnicity will never be used in a credit decision, understanding the trends of minority-owned small businesses enables credit grantors to help these business owners find the appropriate lending products to expand their establishments and succeed.”
Other findings:
• Approximately 7% of all minority-owned businesses are based out of the home, while more than 10% of the general small-business population are home-based.
• More than 31% of minority small-business owners are women.
• Nearly 45% of all minority-owned small businesses come from three states: California (23.4%), Florida (11.4%) and Texas (10.1%).
• Minority small-business owners have an average outstanding business balance of $8,759, while the general small-business owner population has an average outstanding balance of $9,066.