This Latino family is recovering from the coronavirus. But can their small business survive?
Ricardo Aguirre is unsure if he will be able to reopen his small Phoenix business as he and his family struggle to survive the health and economic consequences of the coronavirus pandemic.
On a normal day, Aguirre, 42, would work at Tamales and Tacos Puebla alongside his parents, his pregnant wife, his siblings and his eldest son. All are involved in running the family catering business, specializing in cuisine from the Mexican state of Puebla, using family recipes handed down from generation to generation.
Everything changed abruptly four months ago as COVID-19 began to spread across the country, disproportionately infecting and killing Latinos in some areas. The Aguirres were forced to cease operations on March 17 after Republican Gov. Doug Ducey of Arizona shut down the state for the first time to contain the spread of the virus.
Their business was then inundated with calls from customers asking for refunds.
“Thirty events were canceled in a matter of days. We were stuck at home giving people their money back and, as you can imagine, we ended up with no money,” Aguirre told NBC News.
Since small businesses often operate with low margins, they are more vulnerable to the consequences of a blanket shutdown. A recent National Bureau of Economic Research study found that the number of Latin American small business owners fell from 2.1 million to 1.4 million, a 32% drop, between February and April.
When Aguirre applied for a loan from the Small Business Administration, the government program was strapped for cash. When he realized he only had $ 500 left and couldn’t reopen his business anytime soon, he started a GoFundMe page to help him make up for lost income.
Then things got worse – and hopes of reopening were suspended again – when all members of the Aguirre family fell ill with the coronavirus.
All had to be hospitalized except for her two children and her brother. His parents are still recovering from complications from COVID-19, while the rest of the family is cured. Her father is still in the hospital while Aguirre takes care of her mother at home. At the same time, the Aguirres have lost five members of their extended family in Mexico and the United States to COVID-19.
Nationwide COVID-19 hospitalization rates are second highest among Latinos, after non-Hispanic Native Americans or Alaska Natives, according to the most recent data from the Centers for Disease Control and Prevention.
With no income in sight, Aguirre recently requested an extension of his mortgage, as the amount of nearly $ 3,500 he raised funds was spent on groceries and medical bills.
Camino Financial, a California-based lender that focuses on Latin American small businesses, recently surveyed around 500 small Latin American businesses nationwide and found that most homeowners face “a credit crunch caused by a disproportionate lack of access government relief funds and other lines of credit.
Only 29 percent of Latino business owners asked government enterprise relief through the Paycheque Protection Program and others Small Business Administration Funding Programs, according to the survey. Of those who didn’t apply, 69 percent said they didn’t because they didn’t know if they qualified.
Aguirre was one of them. By the time the second round of emergency funding for small businesses arrived in April, he wasn’t sure if he would qualify as he pays his employees, who are mostly family members, in cash and the application asked for forms he didn’t have.
Sean Salas, CEO of Camino Financial, said the large number of Latino homeowners who had not asked for help was a “fundamental problem” – a systemic lack of “pre-existing lending relationships” between financial institutions and Capital Latino business owners. This, he says, goes beyond “just a SBA that doesn’t do its job of helping small black and brown businesses.”
The lack of existing loan relationships contributes to a “knowledge gap” that makes it difficult for Latin American business owners to know how to react to a crisis.
“You see the repercussions when homeowners aren’t ready to ask for help because they don’t have a 1099 loan contract or their 2019 tax loan,” Salas said.
Aguirre first experienced this “knowledge gap” when the family started the business in 2012.
“We literally didn’t make any money in the first year because we didn’t know how much to charge,” Aguirre said, adding that they then went on to two micro-entrepreneurship programs, Local of Fuerza and Prepared from Arizona State University, to learn how to make their business profitable.
Can they reopen?
If access to capital does not improve over the next six months, nearly half of all black and Latino-owned businesses that are still open will close without knowing if they will be able to reopen, according to a survey advocacy groups Change color, UnidosUS and the Global Strategy Group.
Closures on such a large scale could be devastating since small businesses represent 44% of all economic activity in the United States, according to the Small Business Administration. We think that small businesses are among the country’s largest employers if they are grouped together.
About 70% of Latino-owned businesses surveyed by Camino Financial have closed at some point during the pandemic. In mid-June, before the recent resurgence of COVID-19 cases and further closures, 67% of Latino-owned businesses said they had reopened.
“I interpreted that as a relatively high number. It tells me that they’re resilient because they’re not small businesses, they’re microenterprises,” Salas said.
Microenterprises, a sub-category of small businesses, are businesses with annual sales and assets valued at less than $ 250,000 per year and with fewer than five employees, including the owner.
“This makes them vulnerable, but it also makes them flexible,” a quality that has benefited Latin American businesses ever since. “they experience recession-type environments all the time, most likely due to their high concentration in low to moderate income areas, ”said Salas.
More recently, many small businesses in dozens of states have seen a record increase in coronavirus cases – including Texas, Florida, Arizona and California – face challenges while trying to keep up with changing guidelines from local governments.
Philanthropic groups have led efforts to help compensate for the lack of resources available to Latin American businesses. Hispanics in Philanthropy launched a fund to give more access to capital and more recently launched a campaign encourage consumers to support Latin American small and medium-sized businesses affected by the pandemic.
Rep. Joaquín Castro, D-Texas, part of a new coalition of Latinos which includes actress Eva Longoria, is lobbying the Senate to pass the “HEROES Act” – a $ 3 trillion coronavirus relief program that includes another round of stimulus payments for homeowners. ‘business.
The relief measures, while important, deal with short-term problems, as Salas points out.
“Given the disproportionate lack of access to capital in this market, they are less likely to survive a crisis because they do not receive the relief funds, period,” said Salas. “It doesn’t take a genius to figure this out. “
The plight of Latin American small businesses affects the local economy. The Aguirres donated part of their profits to their local food bank and loaned equipment and time to local church fundraisers. In 2017, they sent food to earthquake victims in Mexico and hurricane Maria survivors in Puerto Rico. In April, they prepared hundreds of meals for first responders, essential workers and residents of the area.
Aguirre hopes to reopen her business in the fall and looks forward to welcoming a baby girl in the coming months. Waiting, “I’m just going to reach out to my community to give me a handhe said, as he works to ensure his parents are cured of COVID-19.