Cerissa Tate was busy designing dream kitchens for her clients’ luxury homes and making plans of her own to expand the interior decorator business she’d started a decade ago.
When 2020 started, she was financially prepared for the typically slow first months of the year. But she was not prepared for what was to come as the pandemic persisted.
“After that, it was a complete halt for a while,” said Tate, owner of Industrious Interiors. She tightened her budget, moved in with friends, and provided consultations via Zoom. Small jobs eventually came her way.
“I survived the pandemic. I did not thrive,” she said.
Many small business owners like Tate were unprepared to weather the kind of disruption of their operations that the pandemic wrought.
Prior to COVID-19, the average small business had only 15 days’ worth of cash in reserve, according to a study by capital services firm Next Street and community investment nonprofit Common Future working with Local Initiatives Support Corporation.
The study presented Tuesday to members of the City Council’s Economic and Workforce Development Committee revealed that Black and Hispanic business owners in San Antonio were the hardest hit. That’s despite the fact Hispanic and Black residents make up 60% and 9% of the population, respectively, but own just 24% and 2% of all businesses.
Ellen Shepard, a Common Future board member, presented findings from the study that were based on interviews, focus groups, and data analysis between July and October 2020.
It assessed the business ecosystem in nine cities and revealed that in the years leading up to the pandemic, “entrenched barriers to capital” suppressed business sustainability and growth in San Antonio.
In 2017, the gap between the supply of capital and the demand from small businesses was an estimated $8.3 billion. The number of available small loans (under $100,000) and mid-sized loans (between $100,000 and $250,000) – essential to the growth of the region’s micro-businesses – was extremely low.
The low rate of commercial bank lending was most prevalent in San Antonio’s South- and Eastside neighborhoods where there are high concentrations of Black and Hispanic residents.
Nationwide, businesses owned by people of color have closed at higher rates during the pandemic than white-owned firms. They have also faced larger cash balance and revenue declines.
The Next Street study grouped the affected industries into three categories: hardest hit, or those that closed or were at risk of closing; impacted but thriving; and insulated with potential.
In Texas, Black-owned businesses operated more commonly in the hardest-hit industries, such as food services, personal services, and gas stations, while Hispanic-owned businesses operated more in the impacted-but-surviving industries, such as construction, transportation, and wholesale.
Between January and September 2020 in San Antonio, total small business revenue declined by 45% and the number of open small businesses decreased by 35%.
Tatu and Emilie Herrera closed their 2-year-old Southside coffee shop, Folklores, when the pandemic began. “That’s when everyone was scared, that’s when no one went out,” Tatu said. “So we closed our business, and then we started helping serve senior citizens in our community.”
Their landlord told them not to worry about the rent. But six months went by, and the Herreras were sinking deeper into debt. They missed a deadline to apply for a Paycheck Protection Program loan. Emilie Herrera was laid off from her human resources job, and the tax bill came due.
Meanwhile, the Herreras couldn’t get out of the lease agreement they had signed before the crisis for a new site on the East Side. That shop opened in July.
“We’re doing slightly better now, but it’s still one of those things where we’re in a hole just trying to get out,” Tatu Herrera said.
It will be a long climb. Herrera had used his retirement savings to open the first store. Facing foreclosure on their home, he and his wife are looking for another place to live. Yet he feels fortunate.
“I have a lot of friends that have small businesses, and a lot of them have it a lot worse than us,” he said. “A lot of them lost everything.”
The experience taught Herrera, who once hosted workshops at his coffee shop for his customers to learn about topics such as using credit wisely, what he’ll do differently in the future.
“All this has changed a lot of things, changed the way I want to do business, changed the kind of place I want to rent out next time,” Herrera said. “[Getting] a loan, for sure.”
The study found that when it comes to loans for small businesses, San Antonio has high levels of Community Development Financial Institution (CDFI) lending, and low levels of Small Business Administration lending compared to other regions with similar numbers of small businesses, such as Indianapolis or Dallas.
CDFI lending is typically provided by LiftFund and PeopleFund, two nonprofit lenders with long histories in San Antonio and the state.
Next Street’s research concluded that San Antonio business owners of color lack not only capital but access to and awareness of the services they need to survive, sustain, and grow their business.
It also showed that the city’s small business ecosystem needs greater coordination and the resources necessary to serve area business owners, especially in neighborhoods with predominantly Black and Hispanic residents.
“Unfortunately, it reminds me of the [COVID-19] vaccination map,” said District 4 Councilwoman Adriana Rocha Garcia, referring to a map in the study that points to areas of the city where business services are absent or minimal. “And so again if you look at access to the vaccine, [and] where we’ve been seeing the COVID cases and everything, it’s the same story once again.”
Shepard said the research team used the study to come up with several recommendations designed to bring together groups of funders to coordinate local funding and track initiatives.
“We found that while the individual service providers are strong, they are not necessarily acting in a coordinated way,” Shepard said. “They lack formal modes of collaboration and shared metrics and goals. And … something we heard from the very beginning in San Antonio, almost this exact verbiage, was San Antonio makes a lot of plans, but doesn’t necessarily come to action.”
District 5 Councilwoman Shirley Gonzales said she looked forward to seeing more actual implementation based on the study’s findings, especially when it comes to small business lending, and challenged JPMorgan Chase and other banks to deliver.
“We do look forward to more support from the private sector to address some of these issues because … in the public sector we can do our part,” Gonzales said. “We can try and create different policies, [but] we can’t do it without the support of the private sector.”
The interior designer Tate made it through the worst of the pandemic with her business intact. The summer’s civil unrest and Black Lives Matter movement drew attention and customers. Now she wants to get back on track toward her goals.
“I have visions of growing into a firm where I have other designers that work with me as well as a small warehouse and staffing for that,” she said. “So at some point I will likely take out a loan or lease a building. … At any rate, I do want to grow my firm so it’s not just me, absolutely.”
