In the past few weeks we’ve noticed announcements about efforts to help out small business in the 3 U.S. states with the largest Hispanic populations: California, Texas and New York.
In California, Wells Fargo gave a $200,000 grant to the California Hispanic Chambers of Commerce to go toward leadership training and business and economic development.
In Texas, legislators approved a bill to dedicate a portion of the Texas Enterprise Fund — an economic development tool — to small businesses that create jobs or move here from another state.” Though not specifically targeting Latinos, the fact is that most Hispanic-owned businesses are small, so this could be very positive for some enterprises.
And finally, New York’s Mayor Bloomberg and Commissioners of Immigrant Affairs and Small Business Services announced a 5-point strategy to support development of Hispanic business. One of the five initiatives is a partnership with the National Hispanic Business Information Clearinghouse, a bilingual information source for Hispanic and Latino entrepreneurs.
What do these programs and initiatives mean? I think they illustrate the importance that small business in general, and Hispanic businesses in these states, have in rebuilding and strengthening the U.S. economy.
Filed under: Hispanic-owned business Tagged: | economic development, hispanic business, latino business
It is a little known fact that a significant number of Hispanic small business owners in California, Nevada, Florida, Arizona, and Texas used their homes to access cash for their businesses in the housing bubble of 2004-2007. In fact, lenders targeted all small business owners to refinance their homes using the Alt-A and Option ARMs mortgages that didn’t require any documentation of income. This appealed to small business owners and they fell prey to these “Toxic Mortgages” which are going to adjust or reset in the next few years 2009-2012. These resets will spike their monthly mortgage payment and cause financial distress that may result in job loss for their employees. I would suggest that you look the California Hispanic Small Business Toxic Mortgage Survey that will be issued as a Press Release shortly. It is based upon a survey of California Hispanic owners conducted by the California Hispanic Chamber of Commerce. The results were shocking and illustrate that Hispanic small business owners are “very worried” that they may not be able to pay the higher mortgage payment at reset. The survey found 1 in 5 were delinquent at this time, while 1 in 2 have these “Toxic Mortgages”. These results should prompt preemptive action by Legislators in Ca, NV, AZ, FL, TX, etc., where Hispanic business has thrived and grown at a pace 3 times that of other groups. These small business owners are at risk of foreclosure and job loss for their employees, as they default on their ‘Toxic Mortgages”.
That is an interesting, and disturbing, symptom of the housing market downturn (or should I say symptom of institutionalized predatory lending practices?) I don’t see any easy way out. It doesn’t seem feasible to “bail out” every small business that received a high-risk loan at taxpayer expense. If these firms can’t refinance–and many won’t be able to if their collateral has gone down in value–they will fail and jobs will be lost. While tragic for these particular companies, it will open up opportunities for new businesses and existing businesses with better financial strategies.
Of course, survival of the fittest is a common response, however, the main problem is that these Toxic Mortgages are also the underlying assets of derivative investments that have been leveraged into the Trillions of dollars and are clogging the balance sheets of banks, causing significant losses for Fannie and Freddie, Federal Home Loan Banks, pension funds, retirement plans, etc. who have the MBS and CDO investments. The solution must reside in new and innovative foreclosure relief legislation. The existing H4H and HASP will not work in the states of CA, FL, NV, AZ, etc. where the largest number of borrowers of these Toxic Mortgages were Hispanic. What I am saying is, “As goes with these borrowers, so goes with our nation”.
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