Latino entrepreneurs are getting more access to credit
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The share of Latino entrepreneurs who applied for credit grew last year, and their credit scores improved as they increasingly became boosters of the U.S. economy, a new study from McKinsey shows.
Why it matters: Latinos in the U.S. create small- and medium-sized businesses at a greater rate than other demographic groups, and they grow their revenue faster.
- But Latinos sometimes struggle for the funds to scale their businesses.
What they're saying: "When you have more of these Latino businesses in different sectors, it creates a positive feedback loop and growth opportunities," says Alberto Chaia, a senior partner at McKinsey in Miami and author of the report.
- Chaia says that has been especially the case in heavily Latino cities like Miami and Austin, but that "establishing these networks, alongside greater access to education and credit or capital, means the gains are reproducible" for the benefit of other urban areas.
By the numbers: 36% of businesses established last year were Latino-owned, per the McKinsey report.
- 15% of all credit applications in the U.S. came from Latino-owned companies, compared to 12% in 2022.
- That increase could be due to growing financial literacy and a greater presence of Latinos in booming industries like fintech, Chaia says.
- The average credit score of Latino business owners also rose, from 632 in 2022 to 647 last year, which McKinsey says is a sign of their increased financial stability.
- "There's still a gap in credit approval rates, but not as large as there used to be," Chaia adds.
What we're watching: Some of these growth markers could be stifled with the promised mass deportation measures of the incoming Trump administration.
- "If the measures curtail the talent pool for hiring that'll affect all businesses, but since Latino businesses are concentrated in sectors like construction, that risk could be magnified," says Chaia.
