Small businesses line Bagley Avenue in the Mexicantown neighborhood of southwest Detroit, Michigan.
Bryan Mitchell | Bloomberg | Getty Images
While another round of small business incentives continues in Washington, 5 million Latinos are at risk of bankruptcy, a new study shows on Monday. Before the pandemic, they were the fastest growing cohort on Main Street, contributing 4% to US GDP. Her death heralds a worrying trend that could turn communities across America on its head.
Statistics reveal the story. Latino Companies Applying to Paycheck Protection Program Record 21% fall in revenue from February to September, while the cost of PPE and other safety measures rose and remains high. In addition, they upgraded their businesses to cope with the pandemic, resulting in huge spending that exceeded their summer revenues. They spent a lot of money trying to stay open and ended up with a negative margin of 11%. You're now cash flow negative and on the verge of end, according to the annual Latino Small Business Biz2Credit survey.
Times were particularly difficult for businesses in the Northeast and Midwest, but as the coronavirus spread across the country, other areas have suffered as well. The Biz2Credit study found that non-Latino businesses were also struggling, even though their earnings were slightly above breakeven.
For the study Biz2Credit analyzed the financial performance of 35,000 companies, including 3,000 Spanish-owned companies, that submitted funding applications through the company's online marketplace. All of the companies taking part in the survey have fewer than 250 employees and annual sales of less than $ 10 million. The report covered small businesses across the country in a variety of industries, from startups to established companies.
Construction is the largest business category, representing nearly 17.18% of Hispanic businesses in the Biz2Credit study. This is followed by services (15.74%), accommodation and catering services (14.63%), retail (9.4%), and transport and storage (7.6%).
Research by the Stanford Latino Entrepreneurship Initiative in May found that 86% of Latino entrepreneurs surveyed reported immediate negative effects of Covid-19. Almost two-thirds of respondents said they would likely be out of business in six months if the Covid restrictions persist. The study also found that Latino business owners are nervous that customers may not feel safe enough to return, and that many may not have money to pay for things.
Before the pandemic, small Latino-owned businesses were faced with barriers to prosperity. Latin American-owned companies are more likely to be startups, have higher credit risk, and therefore have limited ability to secure affordable capital. This can make it more vulnerable to the economic impact of the pandemic: only 11% of small businesses in Latin American-majority communities had more than 14 cash buffer days in 2019, a JPMorganChase study shows.
A driver of the US economy
As a group, Latinos are projected to make up nearly 30% of the population by 2050, compared to 18% today. Latin American-owned companies' revenues grew 61% from 2017 to 2020. They are a growing industry and add to its overall strength, but they are facing big problems in 2020.
"The spirit of entrepreneurship continues to thrive in the Latino population and by the time the Covid-19 pandemic hit everyone back, Latin-owned companies flourished last year. As the economy emerges from the pandemic, we expect them to be on the front lines face the economic recovery, "said Manuel Chinea, COO of Popular Bank.
"Latin-owned companies make tremendous contributions to the US in their communities, including job creation, which also benefits our economy as a whole. Popular Bank is proud to work with them to solve their financial needs," added Chinea .
One is Dr. Fausto Gonzalez, 50, an internal medicine doctor. In the past 17 years it has expanded to four offices across New York City. The majority of his patients are immigrants or their descendants from the Dominican Republic, where Dr. Gonzalez was born. He came to the United States almost 30 years ago and worked in a Brooklyn hospital before setting up his own practice.
In 2020, he borrowed money to buy PPE and put some protective measures in place at his four locations because of Covid. Dr. Gonzalez, whose practice now bills more than $ 1 million annually, was financially injured when non-emergency medical visits were discouraged in the early days of Covid's lockdown. He currently has offices in Jackson Heights, Queens, the East Tremont area of the Bronx, Washington Heights in Manhattan and Ocean Park, Queens, and hopes to open another office next year despite the challenges.
Although things have gone well since the lockdowns were eased, his offices were completely closed at the beginning of the pandemic. When the practice reopened, there was a backlog of patients – and eight out of ten patients had coronavirus. Today he doesn't see more than 15 patients a day to be careful.
"In all of my time as a medical professional, I've never seen anything like it. The Black and Latino communities have been hit hardest," said Dr. Gonzalez. "People have complications months later. It was a trauma to see them die; they are like family."
"When you learn something and help people get better, you feel like you've done your job," said Dr. Gonzalez. "I feel like all these years of medical school have paid off."
– From Rohit Arora, CEO and Co-Founder of Biz2Credit