Latino-owned small businesses represent a significant yet underdeveloped segment of the U.S. economy, with opportunities for further growth and contributions to job creation, according to a new study by McKinsey & Company.
The report, which focuses on Latino-owned small and medium-size enterprises (SMEs) and draws from both publicly available information and proprietary McKinsey data, explores the potential for Latino small-business growth, existing challenges, and potential ways to bridge the gaps between Latino-owned small businesses and their counterparts, offering projections of what a scenario under those conditions could look like:
"A supportive environment could pave the way for the creation of more than 600,000 new businesses, potentially bringing in about $1.2 trillion in revenue and creating five million to six million jobs in the coming decades. Focusing on educational advancement to align skill sets and managerial capabilities with high-revenue industries, developing mentorship programs, and providing access to financing could help unlock this potential, leading to greater economic growth for both Latino-owned businesses and the broader US economy."
The study makes use of the city of Miami as an example of success for Latino entrepreneurs who benefit from favorable conditions. Latinos make up 47% of Miami's population, and 43% speak Spanish, fostering network effects that help businesses thrive. In Miami, 25 out of every 100 Latinos are small-business owners, compared to 8 out of 100 nationally. Latino-owned businesses there generate slightly higher revenue per employee ($235,000) than their White-owned counterparts.
Education plays a crucial role in enabling Latino entrepreneurs to enter higher-revenue industries in Miami. Nationally, Latinos often operate businesses in construction or transportation, but in Miami, they are prominent in professional services, healthcare, and technical fields. Additionally, 30% of Miami's Latino population holds a bachelor's degree or higher, compared to 20% of Latinos nationwide.
Nationally, however, access to funding remains a key factor in small-business success. Latino-owned businesses are increasingly seeking credit, representing 15% of loan applications in 2023, up from 12% in 2022. Average credit scores for Latino business owners improved from 632 in 2022 to 647 in 2024, indicating financial stability. However, Latino-owned businesses often receive smaller loans and experience lower approval rates than White-owned businesses, forcing many to rely on personal savings or alternative lenders.
Another challenge is that, despite progress, revenue gaps persist. Latino-owned small businesses generate less revenue per employee than White-owned firms, partially due to concentration in lower-revenue industries like construction and transportation. Within the same industries, revenue disparities of up to 26% exist, and larger Latino businesses face even wider gaps. These challenges are compounded by difficulties scaling operations and recruiting skilled talent.
Nevertheless, Latino entrepreneurs are the most dynamic group in the economy, driving 36% of new business creation between 2017 and 2021. Increasing Latino participation in higher-revenue sectors and addressing funding inequities could further accelerate growth, given that while Latinos account for 19% of the U.S. population, Latino-owned SMEs represent only 7% of firms with employees.
Reactions to the McKinsey & Company Report
The Latin Times reached out to several movers and shakers across the corporate world to gather their reactions to the McKinsey & Company Report, including Marcela Manjarrez, author of The CEO's Competitive Advantage: Harnessing the Power of the Hispanic Workforce to Drive Business Success; Javier Palomarez, President and CEO of The United States Hispanic Business Council and Mark Damsgaard, Founder at Global Residence Index, a trusted visa & migration agency. Their reactions have been edited for clarity and brevity:
Marcela Manjarrez, author of The CEO's Competitive Advantage: Harnessing the Power of the Hispanic Workforce to Drive Business Success:
The report is another example of the competitive advantage of Latino talent. This a great business case of what can be accomplished if we give opportunities to the remaining Latino talent that is still untapped.
Investors and other decision makers can help propel this innovative, dedicated group by providing opportunities and taking measured risks, including mentoring and sponsorship. Because culturally we have been raised to behave in a more humble manner and keep a low profile, our potential may not seem as obvious, we are hidden diamonds. It may take some discovery and development.
Just like new athletes are scouted from all over the community, identified on potential and developed to be superstars, the same can be done with Hispanics in business. There are so many Hispanic hidden gems in the US, with so much potential waiting to be discovered, developed and unleashed into a precious diamond
Javier Palomarez, President and CEO of The United States Hispanic Business Council:
The McKinsey report underscores why the US Hispanic Business Council proudly champions the tagline "America's Business Future." We firmly believe the Latino community is poised to drive the next wave of economic growth in this country.
I've often said, "Hispanics represent the changing face of America." Our contributions are shaping every aspect of society—media, politics, business, and beyond. But let's be clear: this is not about confrontation. It's about collaboration. Latino entrepreneurs embody resilience, creativity, and an unyielding commitment to the American Dream.
It's not just our businesses that make up the foundation of our economy - it's Hispanic workers and families, too. In fact: According to the department of labor, 78% of net new entrants into the workforce will be Hispanic over the next decade; Our GDP is the fifth largest in the world; Hispanic population growth is outpacing everyone else.
Put simply, the future of America is Hispanic. And we're reporting for duty.
Mark Damsgaard, Founder at Global Residence Index:
I see Latino-owned small and medium enterprises (SMEs) as an underutilized driver of U.S. economic growth. These businesses often demonstrate remarkable resilience and innovation, navigating systemic barriers while building community-focused solutions.
The McKinsey report's projection of $1.2 trillion in potential revenue is both inspiring and a call to action. To unlock this value, policymakers and the private sector must prioritize access to capital, mentorship programs, and policies that foster equitable business environments.
For example, targeted initiatives like low-interest loans or partnerships with Latino business organizations could help these enterprises scale faster and contribute more significantly to job creation.
From a business perspective, the growth of Latino SMEs could also spark innovation and diversification in industries where representation has historically lagged. Their success is closely tied to local economies, with impacts extending to housing, education, and infrastructure. Imagine the ripple effect if even a fraction of these businesses gained the resources to expand; we'd see transformative change in underserved communities across the U.S.
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