The credit crunch is still crimping a full recovery, choking New York’s minority small-business owners, the city’s cash-strapped Latino entrepreneurs and analysts say.
While big banks have started to open up the small-lending spigots again — as the worst of the Great Recession slowly recedes — the results show a glaring deficit.
Small businesses owned by Hispanics in New York City are falling behind, receiving less financing than their non-Hispanics counterparts, according to an analysis of lending data.
Diana Gonzalez of Queens knows the feeling. The 31-year-old native of Ecuador, who arrived in New York at age 19, was in knots as one big bank after another turned down her loan application so she and her sister, Ruth Segarra, 35, could expand their businesses — a carpeting and flooring company in Woodside and a retail shoe store in Jackson Heights.
“It was very frustrating,” Gonzalez told The Post of their recent experience. “We went to a lot of places, but the big banks just did not lend — period. It was tough.” The two sisters eventually organized funding of $75,000 from a non-traditional lender, with an additional $25,000 in the pipeline. Gonzalez says other small-business owners in the Latino community face the same challenge.
The reason? Although there’s evidence of lending bias, analysts also blame the tendency of small Hispanic businesses to concentrate in less-dynamic, less-formal and less-profitable sectors that degrade credit scores compared with other ethnic groups who’ve embraced high-tech, e-commerce and other innovative fields.
“Even when the age of a business — how long a company has been in operation — was the same, the average revenue and credit scores for Latino-owned companies were often lower than those of non-Latino businesses,” according to small-business expert Rohit Arora, CEO of Biz2Credit, which recently conducted an analysis of small-business loan applications.
“The result is that Latino entrepreneurs face greater scrutiny from banks and often have to turn to alternative lenders that charge much higher interest rates,” Arora added.
The findings reflect a national trend. An analysis of lending by the government-sponsored Small Business Administration shows approvals to minority-owned businesses operated by Asians and women climbing rapidly during the past five years.
However, lending to African Americans has sharply declined to the low single digits — and stalled in the low single digits for Latinos.
Meanwhile, small-business loan approval rates nationwide at big banks hit a post-recession high in August for the third consecutive month, according to the latest data from the Biz2Credit Small Business Lending Index.
The number of Latino businesses in NYC has nearly doubled since the late ’90s to more than 140,000 in recent years — and account for 15 percent or more of businesses in the city.
Between their Austro Carpets in Woodside and Emes NY shoe store in Jackson Heights, sisters Gonzalez and Segarra nowemploy about 12 people. Annual revenue at Austro is $1.5 million.
Access to capital is a critical part of success. A business needs it to fuel growth, according to Gonzalez.
“We thought obtaining a loan would have been easier, but it just didn’t turn out like that,” she said.
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