MIGUEL VARGAS runs the Bajucol Dance Studio in East Boston, a business out of step with the social distancing required to fend off COVID-19.
The two-year-old enterprise shut down in March. Vargas has tried hosting classes online, but few customers have signed up. His income has vanished, his rent is two months overdue, and his future prospects are iffy in the “new normal” Gov. Charlie Baker is talking about.
Vargas’ story is typical of many black, brown, and immigrant business owners in Massachusetts who followed their dreams over the last couple years, only to have those dreams turn into nightmares when COVID-19 put the economy into a self-induced coma. Now they find themselves looking everywhere and anywhere for financial help, so far with little success.
The $349 billion Paycheck Protection Program administered by the Small Business Administration through banks across the country, offered loans equal to 250 percent of a company’s monthly payroll. The loans could be forgiven if at least 75 percent of the money was used to retain employees or rehire workers who had been laid off.
The money ran out in 13 days and it appears few minority businesses benefitted. Vargas, for example, discovered his business didn’t qualify because his four employees work as independent contractors. Other minority businesses say they lacked connections to the participating banks or were slow to fill out the unfamiliar paperwork.
Congress is preparing another $310 billion infusion into the program this week, and this time a large chunk of money is being set aside for minority businesses.
Quincy Miller, president and vice chairman at Eastern Bank, said the need is there. “Eastern Bank dispersed 6,600 SBA loans in 10 years. In the first week of this program opening, we had over 7,000 requests,” he said in a recent Boston Chamber of Commerce panel on the issue.
The flood of requests for help has left local banks hunting for solutions as they recognize that black and brown businesses are at a disadvantage. Malia Lazu, executive vice president and regional president at Berkshire Bank, said financial institutions must look more critically at how they can help minorities. “We know communities of color will be hit the hardest and take the longest to rebuild,” she said.
A local funding initiative is picking up steam. Last week, the Business Equity COVID-19 Emergency Fund was launched by a coalition of organizations, including Amplify Latinx, the Black Economic Council of Massachusetts, and the Boston Foundation’s Business Equity fund. The organizations hope to raise $10 million for no-interest bridge loans for businesses with revenues of at least $250,000. The fund’s initial backers include Berkshire Bank and Eastern Bank.
Betty Francisco, cofounder of Amplify Latinx, a nonprofit focused on providing financial resources to young Latino entrepreneurs, said 75 percent of the 30,000 Latino-owned businesses in Massachusetts are microbusinesses, with less than $250,000 in revenue and five employees or less. “A majority have had to close and in some Latino-majority communities like Chelsea, Lynn, and Lawrence, the impact is devastating,” she said.
Some of those minority-owned businesses are retailers, unable to open their doors due to the shutdown. Others rely heavily on senior citizens, who have become shut-ins, or a student clientele, which has left the area due to colleges closing. Others have no place to sell their products, due to corporate events being put on pause. Here’s a look at four of those businesses.
La Guanaquita Boutique
In Chelsea, Noemi Velasco closed her women’s clothing store, La Guanaquita Boutique, the week before Baker made his announcement about non-essential businesses shutting down. “I was so worried about getting the virus, and my employees getting it,” she said in a Spanish-language interview.
Velasco has seven employees, most of whom are paid as independent contractors, which made her firm ineligible for the Paycheck Protection Program.
She paid them half of their weekly paychecks out of her savings for a couple weeks, but she can’t do it anymore. “I’m still paying rent on the space without money coming in,” she said, adding that she also has a second location in East Boston that remains closed.
Velasco has shifted to selling masks, a pack of 20 for $19, in front of her businesses on weekends. To get the word out, she gave several hundred away for free last week, but it’s unclear whether she will make enough money to pay her taxes and hold on to her shops.
“I’m going to be honest. I’m 54, and everything I’ve worked for is gone,” she said. “By the grace of God, we will get through this. Being healthy is the most important thing.”
Place Me is the largest co-living company in Boston, renting out ready-to-move-in spaces for about 30 percent less than the average rent, usually to young professionals and students.
Clara Arroyave, the co-founder, said the four-year-old business had 200 rooms to lease in early March with 95 percent occupancy. Then everything changed with COVID-19. Students began leaving and fellowships were cancelled. No one wanted to sign a three-month-minimum lease, and the company is now down to 50 percent occupancy.
“We sold convenience to people who can’t afford a one-bedroom apartment and the price that entails. But everyone left. It was hard for us to hold them accountable for leases,” said Arroyave. She had projected income this year of around $2.6 million, up from $1.9 million last year. Now she’s reaching out to hospitals to offer discounted rates to first responders, with no security deposits, but she’s anticipating a shortfall this year. She’s let go of three of her 10 staff, and has applied for a slew of aid.
When the Paycheck Protection Program opened up on April 3, she had paperwork ready and filed within half an hour. But the program ran out of money before she could be considered. So she’s moved on to applying for a line of credit at Berkshire Bank available for minority-owned businesses, and separately, an Express Bridge Loan through the Small Business Administration, which gives $25,000 loans quickly.
So far, there’s been no word. Arroyave is a member of Amplify Latinx, a business association that helps young Latino entrepreneurs. She’s been listening to Zoom meetings about the crisis, and picking up a lot of helpful information. For those businesses that aren’t part of associations, she says she can see how they may face barriers to accessing aid.
“Sometimes information isn’t translated into foreign languages, and they don’t have mentorship, which I get through my memberships. Unless you’re part of a business group – networks supporting minorities – you’re off by yourself.”
Corny Bread Company
April Teixeira runs Corny Bread Company, a tiny enterprise run out of Commonwealth Kitchen, a Dorchester-based shared-cooking facility.
Teixeira, a black entrepreneur who started her business two years ago, is proud of her product, a “moist gluten free cornbread with whole kernels of corn blended in.” But most of her opportunities to sell the cornbread have disappeared in the COVID-19 crisis. With the commercial kitchen closed, she has nowhere to bake. Even if she could bake, she has no place to sell. Most of her revenue came from corporate events, such as Monday morning breakfasts at WeWork in Cambridge and Boston, which are no longer happening.
Teixeira has been listening to weekly calls with the City of Boston’s Office for Small Business Development, and applied to the Paycheck Protection Program and other federal programs, but her one-woman business doesn’t qualify.
She has been approved for a small business grant through the City of Boston for $2,500, and is submitting her final paperwork. She’s focused on finding a temporary place to cook out of, and is considering reaching out to hospitals to provide food service once their cafes open back up.
“There’s such a big impact to minority businesses,” said Teixeira. “We often don’t have anything to fall back on.”
Tatis Transportation LLC
In Lynn, Tatis Transportation LLC, a non-emergency medical transportation company, has seen its vehicle trips slashed in half. The seniors the firm once picked up are now stuck inside, and the day programs they looked forward to have been shut down.
“I never expected this, absolutely not. This is jaw dropping, jarring,” said owner Jose Tatis. He sought help from Frances Martinez, head of the North Shore Latino Business Association to navigate financial assistance applications. Martinez has been working around the clock to connect small businesses to resources.
“They’re in the situation of not knowing what will happen–if they will even be able to reopen their doors if this continues,” she said. Most of the group’s businesses have contractors, and don’t have payroll systems because they are so small,” Martinez said.
Tatis has had to lay off four of his 11 employees, but recently found out that his application for a $10,000 loan and grant through another federal initiative called the Economic Injury Disaster Loan Program has been approved. He’s received a few thousand dollars so far, and is waiting for the rest to arrive, along with instructions about how much is a grant, and how much is a loan. “The grant is for payroll, and I want to get those four employees back,” he said.
Tatis also plans to apply for the Paycheck Protection Program if Congress adds more money this week. “I think the loan program should focus on the super-small, four-person businesses that need it, but the big companies are the ones being taken care of first,” he said. “The little guy is being forgotten.”
Tatis believes minority-owned businesses are impacted more deeply than others because they conduct business differently, including paying cash to employees and using 1099s instead of investing in payroll. He said banks are wary of dealing with businesses that operate differently.
While he invested in a high-cost ADP payroll system, he has empathy for other business owners that can’t make a similar long-term investment. “Most minority businesses are really small and it’s hard for them to have money to survive. They’re paycheck to paycheck,” he said.
Because of the nature of his transit business, Tatis thinks he will bounce back faster than others. He’s already contracted with Meals on Wheels to deliver meals—something he didn’t do before coronavirus. “We all need to keep trying new things and remain positive. Don’t cave in. These are tough times for everyone,” he said.