By Janet Álvarez - CNBC + Acorns
[See tonight the program
The Path Forward: Race and Opportunity in America
, in English on CNBC, which analyzes economic issues of the Latino community]
The Latino community has been particularly affected by the COVID crisis despite showing levels of entrepreneurship and new business creation higher than the average for other ethnic groups.
The Stanford Latino Entrepreneurship Initiative reported in May that 86% of Latino business owners had suffered the immediate negative impacts of COVID-19, a higher rate than other communities.
Getting help was also more difficult for Latino business owners, who had less cash available when they applied for pandemic assistance in the form of PPP loans, and were only half as likely as other white entrepreneurs to receive it.
["It's a tough season": Houston small businesses seek to ease the heavy blow of the pandemic]
Still, the crisis caused by the coronavirus accounts for only half of the situation for Hispanic companies today, because before the crisis, Latino entrepreneurs were making great strides: increasing their financing, improving their credit and increasing their income.
That means there is a strength in the Latino business community that can help them overcome the ravages of the pandemic.
Great progress before the crisis
The period from March 2019 to March 2020 was, in a way, a record year for Latino entrepreneurs, driven by the strength of the economy.
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Average annual revenue for Hispanic-owned businesses increased 10% to more than $ 525,000 a year.
And credit scores among Latino entrepreneurs increased to an average of 588 to 618.
But this expansion was also tempered by the reality of growth costs: Average operating expenses accounted for 67% of revenue in 2020 compared to 45% in 2019.
And despite the improvement in revenue numbers, average Latino business earnings were still $ 96,000 lower than those of non-ethnic businesses, highlighting the challenges they face.
[Large companies and small businesses, eager for the "harsh winter", look to the internet and the future Biden government]
The impact of COVID-19
Hispanic businesses have more representation in the construction, hospitality, retail services, retail, transportation and warehousing industries, but unfortunately, these are also among the sectors most affected by COVID-19.
Fewer Latinos lead or are employed in finance and information sectors, which have been less affected by the pandemic, a factor that partly explains why unemployment among Hispanics has exceeded the national average during the crisis.
[Latino businessmen await new financial support to recover their businesses]
Less access to capital, whether in the form of PPP aid loans or private equity, has also slowed the recovery of Latino businesses.
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This is reflected in the growth and recovery statistics: only 6.7% of Hispanic business owners report that they are profitable and growing compared to 14% of other non-Hispanic business owners.
In part, this is because a significant percentage of the financing from PPP funds was distributed through major banks and financial institutions, which have a more limited presence and less relationship with Latino communities.
The way to follow
The future for Latino entrepreneurs is based on a variety of factors, some of which relate to public policy, government intervention, and social differences.
Social disparities include higher rates of COVID infection within the Latino community (impacting the natural consumer base of many Hispanic-owned businesses);
less access to quality child care during the crisis and a less established business record.
In order for Latino businesses to grow and prosper after this crisis, some institutions, such as the Brookings Institution, have called for PPP funds to be allowed to cover more business costs, rather than employee salaries (Hispanic businesses tend to have fewer employees, but need to cover operating costs).
Credit unions, smaller local financial institutions and non-traditional lenders in communities of color should also play a bigger role in distributing these funds, some leaders say.
Still, the shape of the economic recovery and its impact on Hispanic businesses after COVID largely depends on their adaptation to the new economic climate and demand.
Those businesses that can adjust to changing demand patterns, such as virtual or delivery offers, may be more robust.
And those who may evolve with the times as we emerge from this crisis will be in a better position to benefit when the coronavirus is brought under control and the "new normal" is returned.
For the Latino business community, partnering with the Hispanic Chamber of Commerce, or its local chapters, can pay off in getting more help with fundraising and access to federal or local business assistance programs.
The "new normal" will be both a great challenge and an opportunity, and despite some downsides, the resilience characteristic of Latino businesses may be your winning ticket.
This article is part of the Invest in You Ready series. Set. Grow (Invest in you: Ready. Done. Grow), an initiative of CNBC and Acorns, the microinvestment app. NBC Universal and Comcast Ventures are Acorns investors
.
