Maria Palacio had made it.
She grew up on a coffee farm in Colombia. She knew how little money coffee farms and their workers made. When she came to the U.S. in 2010, she wanted to change that, so she founded Progeny Coffee in Palo Alto to help bring growers out of poverty.
Soon, she began supplying Google, Facebook, Microsoft and LinkedIn, providing coffee for the tech companies’ huge campuses, which allowed her to bring awareness to the coffee farmers she started all of this for.
Then tech companies began sending workers home, closing their campuses in Silicon Valley and their towers in San Francisco in the weeks before the coronavirus was officially declared a pandemic. Sales at the company, now based in Berkeley, dropped by 97% after shelter-in-place hit, Palacio said.
“As a family-owned company, we have put everything, everything into this,” she said, “just to see all of that crumble in a second.”
Palacio, who is now using federal money to pay her 10 employees, is far from alone. UC Santa Cruz researcher Robert Fairlie found that in California, Latino businesses have been hit particularly hard by the pandemic — the number of Latino business owners whose firms were active dropped 43% from the beginning of February to the end of April, compared with a 19% drop in white owners of active businesses.
Before the pandemic, Latinos were opening businesses at a faster rate than any other demographic group, according to the U.S. Hispanic Chamber of Commerce.
A survey by small business lender Camino Financial found that 70% of Latino-owned businesses in the U.S. had to close their doors at some point since mid-March — not necessarily closing for good, but at least temporarily halting operations while figuring out how to survive.
The type of business matters a lot, too. According to a survey by the Stanford Latino Entrepreneurship Initiative, Latinos are more likely to own businesses in the hard-hit food service and hospitality industries.
If these closures become permanent, 2 million jobs in the U.S. could be lost, according to Marlene Orozco, lead research analyst on the Stanford study.
Isabel Caudillo had to lay off four of her 12 employees from her San Francisco restaurant, El Buen Comer, when she lost most of her business as a result of the pandemic. It was more of a sit-down place, her son Vlad Caudillo explained, so customers don’t enjoy the food as much when it’s takeout. The restaurant is on a hill, so outdoor dining is impractical.
Now, it’s pretty much just Caudillo’s family working at the restaurant. The takeout orders, plus some partnerships with local organizations like La Cocina, Dine11 and SF New Deal, have kept them afloat for now, but they aren’t sure what will happen if those funds run out, Isabel Caudillo said.
“We’ve been pretty lucky,” Vlad Caudillo said, but he misses seeing and serving the restaurant’s “really loyal” customers. “Most of the people that come here, we’ve known since we opened.”
Only 1 in 6 Latino-owned businesses that generate more than $1 million in revenue have enough cash on hand to survive over six months, compared with 1 in 4 white-owned businesses of a similar size, the Stanford study found.
“I think it fundamentally goes back to legacies and histories of (lack of access) to financial services,” Orozco said. “Latino businesses have been left behind.”
Latino-owned businesses also have received government-funded pandemic relief, like the federal Paycheck Protection Program, that has been essential in keeping businesses afloat.
The Stanford study found that while 33% of Latino-owned businesses applied for PPP loans, only 10% were approved. White-owned businesses, on the other hand, were approved at a higher rate — a similar percentage applied but 17% were approved. Of those approved, only 3% of Latino-owned businesses received full funding, compared with 7% of white-owned businesses.
Dilsa Lugo owns Los Cilantros in Berkeley. She lost 90% of her sales because of the pandemic, but has been working with La Cocina and World Central Kitchen to stay in business. She applied for a PPP loan through her bank, but didn’t get approved. She doesn’t know why.
“It was a mess,” Lugo said. She’s still in business, but was only able to keep four of her employees.
Of the Latino owners who didn’t apply for the federal aid, 69% said it was because they didn’t believe they would qualify, and 19% needed technical help with the somewhat complicated application, according to Camino Financial.
“They struggled understanding how to calculate the funding eligibility piece,” Sean Salas, chief executive at Camino Financial said. “And of course, there are limited resources available to Spanish-speaking or Spanish-dominant business owners.” Salas’ Los Angeles startup focuses on lending to those customers.
The PPP was able to help keep Progeny Coffee and El Buen Comer in business, but isn’t a panacea. The program requires companies to use at least 60% of the money to cover their employees’ paychecks in order for the loan to be forgiven, which means people have to keep working.
Brenda Juarez runs El Pipila in San Francisco with her sister and her mother, who owns the restaurant. They got approved for the PPP loan, but when Juarez asked her employees about coming back to work, they weren’t ready to yet because of the coronavirus. She had to give up the loan so that they wouldn’t owe any money.
They had around $10,000 in savings, but that was all spent within the first month of the pandemic paying employees and operating costs. Now, just she, her mother and her sister are working, and they’re not taking paychecks.
“It’s been really hard,” Juarez said. “But I knew I need to do that for my mom, and I knew I needed to do that for myself and my sister just so we can feel something productive again.”
Despite the disparities in resources, Latino business owners tend to be just as optimistic about the future as their white counterparts. Nationally, 80% of Latino business owners and 79% of white business owners report that they think they’re likely to recover from the pandemic, according to the Stanford Latino Entrepreneurship Initiative.
Palacio, for example, decided to start selling directly to customers, letting them subscribe online for regular coffee shipments. It’s not profitable yet, and it’s far from making up the sales she used to have, but “it’s growing,” she said.
She describes the experience of the pandemic devastating her business as “a journey.”
“With every challenge, there are opportunities,” she said.
The Juarez family added burritos to their menu, despite their matriarch’s hesitancy, because they knew burritos were the type of takeout item that would sell.
“We needed to customize to whatever people were looking for,” Juarez said.
The business owners say that leaning on community has been a major factor in helping them survive. Palacio, Juarez and Caudillo each said that help and guidance from the various groups for business owners that they’re a part of have been a major factor in their ability to navigate this pandemic.
“I know for a lot of companies out there, they just feel so lonely and so scared,” Palacio said. “You need to really rely on the power of community.”
“I’ve always believed in hiring from the community and promoting from within,” Miguel Galarza, owner of Yerba Buena Engineering and Construction, said. “Through the good times and the bad times, we try and stick together.”
Camino Financial also found that despite the wave of temporary closures, 67% of Latino businesses have reopened to some extent, and of the remaining 33%, many expect to reopen.
Latino business owners are “a lot more resilient than I think we give them credit for,” Salas said.
“There’s always a bright side,” Lugo said. “We don’t have to lose hope.”
Danielle Echeverria is a San Francisco Chronicle staff writer. Email: danielle.echeverria@sfchronicle.com Twitter: @DanielleEchev
The Link LonkAugust 09, 2020 at 02:00AM
https://www.sfchronicle.com/business/article/Latino-businesses-have-been-hit-hard-by-the-15468331.php
Latino businesses have been hit hard by the pandemic. But owners won’t give up hope - San Francisco Chronicle
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