Prior to the pandemic, Hispanic entrepreneurs were the fastest-growing segment of business owners in the United States. Over the past decade, the number of Latino business owners grew 34%, while the number of overall business owners grew just 1%, according to a Stanford University study. The same study calculated that Latino entrepreneurs contribute a whopping $500 billion to the US economy each year in sales. Per a report from the Stanford Latino Entrepreneurship Initiative, Latino-owned businesses employed more than three million people in 2019, 5.5% of all US employment, and accounted for 4% of the country’s total revenues.
However, this strong momentum has been disrupted by the country’s unprecedented public health crisis, which has been overall devastating to small business owners — but particularly troubling for entrepreneurs of color.
According to a September 22 report from SCORE, the nation’s largest network of volunteer expert business mentors, Hispanic small business owners have been particularly impacted by the coronavirus pandemic. Just 6.7% of Hispanic business owners reported profitability and growth, as opposed to 14.7% of White-owned businesses. Over half said their businesses have not been profitable during the pandemic.
Why Hispanic business owners may have experienced disproportionate struggles over the past few months is attributed to several factors in the report. A higher proportion of Hispanic business owners, compared to White business owners, reported a need to work remotely (33.2% vs. 25.1%), a lack of childcare (21.4% vs. 8.8%), either themselves or their family being infected with COVID-19 (29.2% vs. 20.5%), or their staff being infected with COVID-19 (14.4% vs. 11.4%). Since the pandemic began, all these changes have put increased pressure on Hispanic entrepreneurs, making it more difficult to keep going with business as usual.
Furthermore, according to the SCORE report, Hispanic entrepreneurs have received less outside help than others. A jarring revelation from the report is that Hispanic-owned businesses were more likely to seek — but less likely to receive — both outside funding and government funding. For example, just 36.8% of the over 50% of Hispanic business owners who sought Paycheck Protection Program (PPP) aid from the government received it, versus 63.7% of the less than 50% of White business owners. Hispanic business owners were similarly disadvantaged in obtaining Small Business Association loans, unemployment insurance benefits for self-employed workers, a payroll tax credit on worker wages, or a delay in employer-side payroll taxes.
The absence of government loans to Hispanic business owners has been reported prior. In fact, an early report from the League of United Latin American Citizens (LULAC) and the US Hispanic Chamber of Commerce documenting the dispersal of the federal stimulus aid, found that of a survey of more than 500 Latino small-business owners who applied for coronavirus relief loans, just 97 received the money while the rest never heard back on their applications.
“The survey only confirms what we already know, that the Paycheck Protection Program money went to Wall Street billionaires and very little of it trickled to the mom-and-pop shops and small businesses of America,” said LULAC National President Domingo García. “Lupita’s taqueria or Juana’s quinceañera didn’t get money while Ruth’s Chris [Steakhouse] and major hotel chains are getting millions of dollars.”
The pandemic also appears to have further exacerbated inequalities that existed before, including a relative lack of investment in diverse small businesses. While 13.3% of the around 10% of White business owners who sought new investors achieved this goal, 0% of the nearly 30% of Hispanic business owners looking for new investors found them, per the SCORE report. White business owners outperformed Hispanic business owners in every single category in terms of receiving the aid they asked for.
Experts have warned that Latino wealth and income, on the mend from the devastating Great Recession, could be “decimated” once again by the coronavirus. “While the pain from the pandemic crosses all races and ethnicities, experts say Latinos stand to endure a deep economic blow due to persistent income inequality, disparities in wealth, the fragility of Latino small businesses and the large number of Latinos employed in service industries such as hotels, restaurants and retail stores — many of which have been forced to shut down,” NBC News reported in April.
That being said, all hope is not lost. Hispanic business owners have proven their resilience time and time again — and early data already shows promising signals of recovery. SCORE found that Hispanic-owned businesses are more optimistic about hiring in the next year than White-owned businesses. While just 38.3% of White entrepreneurs said they planned to add employees in the next 12 months, 50.8% of Hispanic entrepreneurs said they’d be ready to hire within the year. However, recovery needs to focus on more than just bouncing back from the pandemic.
“The pandemic, like most societal crises, highlighted and exacerbated pre-existing inequalities,” concluded a report published this month by McKinsey. “The recovery should focus on working toward equity between Hispanic and Latino communities and the rest of the United States, especially where Hispanics and Latinos currently face outsized obstacles. Such a recovery can lead to inclusive growth, which is an investment in future growth of the US economy as a whole.”
NOTE: There is a distinction between the terms “Hispanic” and “Latino.” “Hispanic” is a term that generally refers to native speakers of Spanish, or people with Spanish-speaking ancestry. On the other hand, “Latino” is more frequently used to refer to anyone of Latin American origin or ancestry. In the US, for example, by the US Census Bureau, these terms are often used interchangeably. Therefore, the two categories may not perfectly overlap.
About the Author
Jemima is a journalist who enjoys reporting on business, particularly small business and entrepreneurship.