A 2020 poll from the U.S. Chamber of Commerce put it bluntly: In May 2020, 78% of minority-owned businesses said they were concerned about closing permanently, as compared to 52% of non-minority-owned businesses. The president of the U.S. Chamber stated in those early days of the pandemic that this anxiety demonstrated economic inequalities throughout the country, ones that COVID may exacerbate. In many ways, that’s exactly what we saw throughout the U.S. and here in Tucson. And while mandates are removed and businesses are reopening, many of the problems from COVID remain for minority-owned businesses.
“A lot of these small businesses were impacted tremendously because some of them were operating paycheck to paycheck, and whatever savings they did have, they immediately started tapping into or using their personal credit cards to keep afloat. So they’re taking even longer to get into a financially stable situation,” said Magdalena Verdugo, CEO of the YWCA of Southern Arizona. “If you were doing well already, and had reserves and were more astute with technology and could access resources easier, you may not have been as impacted. It was primarily those minority-owned and women-owned businesses that were hit hardest.”
Similar difficulties affect minority-owned businesses on a statewide level. According to the Arizona Hispanic Chamber of Commerce, minority-owned businesses see an average revenue of $110,000, whereas non-minority-owned businesses make an average of $500,000. This translates to minority-owned businesses having far less cash reserves, or “float,” making them more susceptible to closure during economic upheaval.
“The estimate I’ve heard is that for every one pandemic year, it’s a three-to-five year recovery,” said AZHCC President & CEO Monica Villalobos. “All businesses impact the families of their employees, but the reason minority businesses are unique is that 56% of minority-owned businesses are family-owned. So when a business goes down, or a business owner goes down if they’re sick, that entire family is without a revenue source.”
In addition to offering $6,000 Small Business SUCCESS Grants to their members, AZHCC also provided consultancy to help minority-owned businesses pivot their output. For example, one of their members was a restaurant, and AZHCC helped shift their business to focus on catering in order to stay active during the pandemic.
“Collaboration was the name of the game. It was critical to survival,” Villalobos said. “They were small and vulnerable businesses, but also small and nimble… We had to implement a pivot strategy as well. We took a lot of our folks that were focusing on business development, because businesses were not in a position to join as members, and pivoted those people to become grant specialists and business consultants. The Arizona Hispanic Chamber of Commerce has been around for more than 70 years, and this was really a test. If we couldn’t help our business members then, what good are we?”
As part of the City of Tucson’s CARES Act funding, $2M was initially approved for small business grants. YWCA was selected to administer these funds out of their Women’s Business Center as small business continuity grants. YWCA women’s business center is one of the only such business centers in the state, providing entrepreneurship and training for women and minority-owned businesses.
Although a majority of applicants were women-owned businesses, applications were available regardless of gender. However, the grants were prioritized for minority-owned businesses, as well as ones that were owned by women, veterans and disabled workers.
YMCA and the Community Foundation for Southern Arizona examined what small businesses’ income looked like in February vs April 2020, in order to “fill the gap” of revenue lost. Initially, businesses could get anywhere from $2,500 to $10,000.
“The funding went very quickly,” Verdugo said. “As we went further into the year, we realized this was not a short pandemic, and we were in it for the long haul. So we expanded the grant maximum from $10,000 to $20,000, and expanded the financial review to 2019 in comparison to 2020.”
As more funding and grant opportunities became available, YWCA ultimately distributed more than $9M to local businesses. These grants included Small Business Utility and Rental Assistance, Small Business Continuity grants, and grants specific to Rio Nuevo District, all distributed before the end of the year.
“We were working through Christmas, right up to New Year’s, ensuring the resources were not only awarded, but were hitting out small businesses’ accounts in a timely manner,” Verdugo said.
However, as they worked with local small businesses, they quickly realized some were in need of more than funding. Small businesses, such as some restaurants, weren’t prepared to shift online for a new way of taking orders. So YWCA also helped with website development, and what software they could access to be able to have digital sales.
“We had a lot of businesses that were limited in English, so we had to translate. A lot of the time, it was providing one-on-one coaching through the application process,” Verdugo said. “Now, we did roll out the application both in English and in Spanish, so it was more about navigating the websites, and understanding what documentation we were requesting.”
YWCA even helped them establish business accounts to accept funds, made their computer lab available for use, and introduced them to local financial institutions. Verdugo says YWCA became an information conduit for small and minority-owned businesses, and continues to do so.
“Businesses that were small, whether they were restaurants or in the service industry, we found they were highly impacted, because they often lacked the ability to access PPP and EIDL loans,” Verdugo said. “For the PPP loans, it was very evident you needed to have a relationship with a financial institution in order to leverage that, which a lot of our small businesses lacked. They also might not have known how to go about applying, or weren’t prepared by not having the documentation in the format it was requested.”
YWCA eventually saw collaboration between the small businesses they helped, forming networks to support each other and sharing information on how to weather the pandemic. These relationships remain, as YMCA continues to serve as a conduit of information for minority-owned businesses still struggling.
“Although minority-owned businesses have definitely suffered, I remain confident they will rebound and recover,” Villalobos said. “That’s just the nature of the entrepreneur, particularly the minority entrepreneur.”
Jeff Gardner, Inside Tucson Business Jun 18, 2021