I have a guest post here from Manuel Baigorri, who has been interning in BusinessWeek’s Chicago bureau. In it, he reports on the effects of the credit crunch on Hispanic-owned small businesses.
Fidel Castillo is nervous. Standing in his 7-year-old Ecuadorian restaurant, La Peña, in Chicago’s Portage Park neighborhood, he wonders how much longer it will be able to continue operating.
“We are very pessimistic about the future,” says Castillo, 42, who has seen revenues slide 35% in the last few months. “We are small and we are encountering a lot of problems in order to get credit.” Ecuador-born Castillo wants a credit line to keep his 12-employee restaurant running but says banks he approaches are stepping up lending barriers. “The American dream does not exist anymore,” Castillo says.
David Hernandez, chairman and CEO of Fort Lauderdale, Fla.-based retail energy provider Liberty Power has a different perspective. “We are being more careful from a credit standpoint with the customers we bring on,” he says. In doing so, Hernandez points out that he now thinks twice before signing up a new customer and makes sure that a company has a solid credit rating, and also how long it has been in business or what kind of industry it is in.
Meanwhile, Pedro Cevallos, executive vice-president of Primera Engineers, a 150-employee Chicago-based company specialized in electric power distribution, says his company is keeping its entire workforce intact for now but notes some major projects planned for the next couple of years are getting postponed or even canceled.
The credit crisis is having a negative impact on the estimated 3 million Hispanic-owned small businesses in the U.S., experts and advocates say. Harley Shaiken, a professor who specializes in labor issues at U.C. Berkeley, says the crisis will affect all Americans, but Latinos will be hit particularly hard. “Many Hispanics own small businesses that are not very well capitalized.” David C. Lizarraga, chairman of the U.S. Hispanic Chamber of Commerce, says that more than 80% of its members say their businesses are in trouble because of difficulty in obtaining credit.
Still, despite the ongoing crunch, Hispanic Business magazine’s research arm HispanTelligence estimates that the number of new Hispanic-owned businesses will grow at a compound growth rate of 9% during the next four years to more than 3.6 million by 2010 and 4.3 million by 2012.