Lockdown closed their family catering company. Then the refunds left them with 'no money.'
Ricardo Aguirre doesn’t know if he’ll 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 be working at Tamales y Tacos Puebla alongside his parents, his pregnant wife, his siblings and his oldest son. All of them help run the family catering business, which specializes in cuisine from the Mexican state of Puebla, using family recipes passed down for generations.
Everything abruptly changed four months ago as COVID-19 started spreading 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 first closed the state to contain the spread of the virus.
Their business was then swamped with calls from clients requesting 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 were left with no money,” Aguirre told NBC News.
Because small businesses oftentimes operate on thin margins, they’re more vulnerable to the consequences of a widespread shutdown. A recent study from the National Bureau of Economic Research found that the number of Latino small-business owners dropped from 2.1 million to 1.4 million— a 32 percent decline—between February and April.
By the time Aguirre applied for a loan from the Small Business Administration, the government program had run out of money. When he realized he only had about $500 left and wasn’t going to be able to reopen his business anytime soon, he started a GoFundMe page to help him make up for the lost income.
Then, things got worse — and hopes for reopening were further put on hold — when all the members of the Aguirre household got sick with the coronavirus.
All of them had to be hospitalized except for his two children and his brother. His parents are still recovering from COVID-19 complications, while the rest of the family has healed. His father is still at the hospital while Aguirre is caring for his mother at home. At the same time, the Aguirres lost five members of their extended family in Mexico and in the U.S. to COVID-19.
COVID-19 hospitalization rates nationwide are the second highest among Latinos, following non-Hispanic Native American or Alaska Native, according to the most recent Centers for Disease Control and Prevention data.
With no revenue in sight, Aguirre recently requested an extension on his mortgage as the nearly $3,500 he fundraised has been spent on groceries and the piling medical bills.
Camino Financial, a California-based lender focusing on Latino small businesses, recently surveyed about 500 Latino-owned small businesses nationwide and found that most owners are facing “a credit crunch caused by a disproportionate lack of access to government relief funds and other lines of credit.”
Only 29 percent of Latino business owners applied for government business relief through the Paycheck Protection Program and other Small Business Administration funding programs, according to the survey. Of those who didn’t apply, 69 percent said they didn’t because they were unsure if they qualified.
Aguirre was one of them. By the time the second round of emergency funding for small businesses came around in April, he was unsure if he would qualify because 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 owners who didn’t apply for aid speaks to “a root issue”—a systemic lack of “pre-existing lending relationships” between financial institutions and Latino business owners who need capital. This, he says, goes beyond “just the SBA not doing its job to help Black and brown small businesses.”
The lack of existing lending relationships contributes to a “knowledge gap” that makes it difficult for Latino business owners to know how to respond to a crisis.
“You see the repercussions of that when owners aren’t ready to apply for aid because they don’t have a 1099 contract ready or their 2019 taxes ready,” Salas said.
Aguirre first experienced this “knowledge gap” when the family launched the business in 2012.
“We literally didn’t make any money that first year because we didn’t know how much to charge,” said Aguirre, adding that they later participated in two microentrepreneurship programs, Fuerza Local and Arizona State University’s Prepped, to learn how to make their business profitable.
Can they reopen?
If access to capital doesn’t improve in the next six months, nearly half of all Black and Latino-owned businesses that are still open will close down without knowing if they’ll be able to reopen, according to a survey from the advocacy groups Color of Change, UnidosUS and the Global Strategy Group.
Closures on such a big scale could be devastating since small businesses account for 44 percent of all U.S. economic activity, according to the Small Business Administration. It’s estimated that small businesses are among the country’s biggest employers if grouped together.
About 70 percent of Latino-owned businesses surveyed by Camino Financial closed down at some point during the pandemic. By mid-June, before the recent resurgence of COVID-19 cases and new closures, 67 percent of Latino-owned businesses said they had reopened.
“I interpreted this as a relatively high number. That tells me that they’re resilient because these aren’t small businesses, these are microenterprises,” Salas said.
Microenterprises, a subcategory of small businesses, are companies with annual sales and assets valued at less than $250,000 per year and with fewer than five employees, including the owner.
“That makes them vulnerable, but it also makes them flexible,” a quality that benefits Latino-owned businesses since “they’re experiencing recession-like environments all the time, most likely due to their high concentration in low- to moderate-income areas,” Salas said.
More recently, many small businesses in dozens of states that have seen record-breaking increases in coronavirus cases — including Texas, Florida, Arizona and California — are facing challenges while trying to keep up with changing guidelines from local governments.
Philanthropic groups have spearheaded efforts to help compensate for the lack of resources available to Latino businesses. Hispanics in Philanthropy started a fund to provide more access to capital and more recently launched a campaign to encourage consumers to support Latino small- and medium-size businesses affected by the pandemic.
Rep. Joaquín Castro, D-Texas, part of a newly formed coalition of Latinos that includes the actress Eva Longoria, is urging pressure on the Senate to pass the “HEROES Act” — a $3 trillion coronavirus relief package that includes another round of stimulus payments for business owners.
Relief measures, while important, address short-term issues, as Salas points out.
“Given the disproportionate lack of access to capital in this market, they’re less likely to survive any crisis because they’re not getting the relief funds, period,” Salas said. “It doesn’t take a genius to figure that out.”
The fate of Latino small businesses affects the local economy. The Aguirres have been donating part of their profits to their local food bank as well as lending 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 cooked hundreds of meals for first responders, essential workers and area residents.
Aguirre hopes to reopen his business sometime in the fall and looks forward to welcoming a baby girl in the next few months. In the meantime, “I’m just going to reach out to my community to lend me a hand,” he said, as he works on ensuring his parents heal from COVID-19.