President Joe Biden speaks during a small business related announcement in the South Court Auditorium of the Eisenhower Executive Office Building on February 22, 2021 in Washington, DC.
Alex Wong | Getty Images
The Latino community is particularly hard hit by the Covid-19 crisis. The Stanford Latino Entrepreneurship Initiative reported in May that 86% of Latino entrepreneurs had felt the immediate negative effects of Covid, a higher rate than other races. It was also harder to get help for Latino business owners who had less cash to hand when they requested Covid assistance in the form of PPP loans and were only half as likely as their white counterparts to get it.
The Biden government’s new PPP loan initiatives, which include extending loans to lawful residents (and not just citizens), address this inequality. The new PPP loan program initiatives will reach more Latino entrepreneurs in several ways: They create a two-week exclusive application period for small businesses (with fewer than 20 employees) starting Wednesday, February 24th. In addition to providing the loans to non-citizen business owners such as green card holders, the loans cannot be denied to those who have defaulted on student loans.
The Biden administration aims to help small, minority-owned businesses more directly in order to achieve a strong economic renaissance. The Covid crisis only tells half the story of where Hispanic companies are, as before the crisis, Latino entrepreneurs made great strides – they increased their funding, improved their credit and increased their sales. This means that the Latino business community has a fundamental strength that can be used in the reappearance of Covid.
Latino business growth before the crisis
From 2019 to 2020, Latino entrepreneurs were financially strengthened, carried by the strength of the general economy. The average annual revenue of Hispanic owned companies grew 10% to over $ 525,000. The creditworthiness of Latino entrepreneurs rose from an average of 588 to 618. However, that expansion was also tempered by the reality of the cost of growth. Average operating costs accounted for 67% of sales in 2020, compared to 45% in 2019. Despite improving sales, the Latino business’s average sales were still $ 96,000 lower than the white company’s sales, highlighting the challenges.
Construction, housing, and retail services, retail, and transportation and storage continue to represent the multitude of Latin American owned businesses. Unfortunately, these are also among the sectors hardest hit by Covid. Industries like finance and information, which are among the least affected by the pandemic, are led by Latinos or employ some of the lowest percentages. This partly explains why unemployment in Latino exceeded the national average during the crisis.
“The unemployment rate among Latinos was so high because so many of them work in restaurants, retail and hospitality. That is just starting to recover,” said Louis Barajas, COO and partner at MGO Wealth Advisors, and a member of CNBC Advisory Council.
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The path for Latino entrepreneurs is based on a variety of factors including public order, government interference, and general societal issues. These include persistently higher rates of Covid infection within the Latino community, which are impacting the consumer base of many Hispanic owned companies. less access to quality childcare during the crisis; and less established business stories.
“So many Latinos are affected by Covid,” says Barajas, adding that access to vaccines will make a difference.
Adjusting to the economic reality after the pandemic
The shape of the economic recovery and its impact on Hispanic businesses after Covid will depend in large part on how businesses adapt to the new climate and demand. Companies that can easily adapt to changing demand patterns such as virtual offers or provisioning offers have a more sustainable operation with higher reliability. And those who can evolve over time as the country emerges from this crisis will be better equipped to benefit from a “new normal”.
In a way, the community-based, close relationships of many Hispanic companies are among their greatest strengths. As demand returns across the economy in 2021, Latino business community involvement in the U.S. Hispanic Chamber of Commerce or its local divisions can pay off as networking within the community leads to valuable connections, more support in collecting Donations and access to federal or local authorities can result in business support programs.
“Latinos have really relied on their families, communities and connections to help each other out of the crisis,” says Barajas.
The new normal will be a test and an opportunity. For the Latino business world, which has fully embraced the entrepreneurship despite some drawbacks, their resilience may be the winning ticket.