Women Entrepreneurs Survive With Faith, and Small Loans
Small Business in Williamsburg, Brooklyn
New York, 12/12/2008 – With major banks and other institutions cutting the stream of credit down to a trickle, women entrepreneurs are facing the greatest difficulties to stay in business. The survival effort requires them to resort to lines of credit with personal property as collateral, or to use credit card cash advances at a high interest rate. These, among other tactics, help them understand their business as well as their best friend.
Brenda Maeda, an immigrant from Guatemala who owns Hair and Beyond, a beauty salon in Rye, NY, near to Port Chester, has seen a 30 percent decrease of business activity in the last three months. She knows that is just the beginning and expects to confront the real slowdown in January.
“It took me more than a year to grow 30 percent and only two months to lose it,” explained Maeda, 33, about the ups and downs of her small business, which she expanded in February 2007.
In Rye, she has 11 employees, three on pay roll and eight working on commission. In Harrison, NY, where she originally opened her business, had a smaller salon with only four chairs and two employees.
“Now, many of my regular clients wait six to eight weeks to get their hair dye and I have to keep paying for the loans I used to expand,” said Maeda, who after Christmas will cut the working hours to many of her employees.
Women entrepreneurs like Maeda face varied problems these days according to a recent Small Business Administration’s report. Keeping up with payments is only one of their problems. A decrease in revenues and the two-thirds of U.S. banks tightening their lending to small business are some others. That situation forces them to request lines of credits in banks or to resort to micro loans. Maeda appealed to both of them to stay in business.
“Last year I used some money from a line of credit from Washington Mutual and this year I got a $21,000 loan from Accion NY,” Maeda said.
Maeda and her brother borrowed $35,000 from Washington Mutual from a line of credit using their house as collateral. She used $8,000 for her business and the rest for improvements in the house they own together. To get the loan at Accion NY, she had to ask her brother to be a co signer after the organization reviewed her latest income taxes and her credit report.
Maeda’s goal now is to pay both loans, avoid borrowing again, and refrain in her business. That includes cutting publicity in the local newspapers and attending more networking events and community fundraisers where she can promote her business.
“People are more cautious these days,” explained Lauren Kozien, communications director of Accion NY, an organization that provides microloans ranging from $500 to $50,000 to individuals who have no access to traditional sources of credit. “We have seen an increase in our lending but I don’t think is that large. Some businesses feel is not the best time to expand, but still out there are entrepreneurs willing to push forward.”
Accion NY’s requirements to grant a loan -with interest rates of 10.99 percent, and at reduced rate of 6.99 percent for the Bronx and Upper Manhattan,- are that small business owners don’t have any outstanding payments with credit card accounts, other loans or mortgages, and have had not bankruptcy in the last 12 months.
The majority of Accion’s borrowers are minorities and immigrants, 38 percent women and 62 percent men. When they lag behind in their payments, Accion NY works closely with them to make sure the loan remains manageable, and offers one-on-one counseling and credit seminars to teach them how to remain focus.
“The bulk of our credit seminars are attended by women. They are usually the first ones to realize that they have to make changes and implement actions in order to survive a crisis,” said Kozien, who also asserts that all entrepreneurs, women and men, are struggling right now.
Lack of Information Harms
Marina Flores
Marina Flores is another minority entrepreneur who, despite the financial turmoil, hopes to keep her business alive with the help of faith and a small loan. Flores, 50, an immigrant from the Dominican Republic arrived to the U.S. in 1997. She owns a beauty salon, Mi Nueva Imagen, (My New Image) on Driggs Street in Williamsburg, Brooklyn.
Although Flores has not perceived a substantial decrease in her business yet, she hopes to maintain revenues at least until she pays off a $13,000 loan to BOC Capital Corp., a not for profit organization in Brooklyn that rescued her from sky rocketing payments from a Bank of America’s loan.
“In February 2008 I needed money to expand my business and my first thought was to go to the bank. The manager at the branch told me that I had $8,000 available on my credit card. I borrowed them and I ended up paying a 33 percent interest rate for a cash advance,” explained Flores, who lives in Brooklyn and supports financially four grandchildren and two of her five sons in the Dominican Republic.
Even thought she has a bigger beauty salon now and steady clients, she has been hesitant to hire any employees. At her business Flores greets the customers, washes, cuts and dries their hair, and also cleans the place herself. Four more hairstylists work there, two rent two chairs and two on commission. “The salon’s weekly income is about $1,500. Enough to pay the utility bills, the $2,000 rent, and the monthly payment to BOC,” she said.
Getting access to credit and the lack of financial knowledge are the most common obstacles for immigrant entrepreneurs like Flores. But many of them get help from organizations like BOC Capital Corp., which provides short and long term loans ranging from $500 to $25,000, with interest rates of 8 percent to 10.5 percent.
According to its senior lending officer, Hector Davis, BOC bases its criteria for lending in the entrepreneur’s ability to penetrate the market and his business experience. “A loan is something that you take and start paying within 30 days. Your business plan must show that you are able to do it,” he explains.
“Women entrepreneurs have some advantages. They are willing to research and ask questions more openly than men, and implement an advice into their businesses,” said Davis. “They are less likely to walk away from a difficult situation.”
This business counselor also believes that women will play an important role in overcoming the current economic crisis. “There might be a woman who needs to close her business and go to the work force, or there might be another who feels that if she puts more time into their business she can make it work,” he said. “It’s all about determination and intuition to make a business succeed.”
No looking back
Veronica Cicero
Veronica Cicero, an event planner, worked with determination for two and a half years to make her small business succeed. Last September she gave up due to the low revenues and high expenses and closed down Carrousel Dreams, a store located in Jackson Heights, Queens.
To open her business in March 2006, Cicero, 28, grabbed all her savings, a small loan from her mother and a $20,000 loan from Accion NY. In the beginning, her business did good and never show red numbers, according to her. But her break-even point last December concurred with the first signs of the economic slowdown.
“If I had had some more capital, I might have survived. The store had regular clients of its own,” said this entrepreneur born in Caracas, Venezuela, and who currently works for a decoration company in Manhattan.
One of the experiences Cicero took from the entrepreneur experience is that, despite working arduously, she felt like a parasite. “I worked very hard all that time and never brought anything home. My husband was essentially supporting me. All the revenue at the store went to get more merchandise and to pay the rent. It was like a vicious cycle,” she said.
The other bitter experience for her was the difficulty of getting credit. “I asked for a line of credit at Washington Mutual and didn’t get it. I had a business account at Commerce Bank and I couldn’t get a line of credit there either, not even an overdraft. To get the loan at Accion NY, I had to bring my husband in as a co signer”, she said.
Last September, when her business closed, Cicero stopped her payments to Accion NY. She and her husband owe $9,000 to the not for profit organization, but they recently settled down the balance with Accion NY for less than and started to paid it.
Cicero does not feel undeterred by the outcome of her first experience as an entrepreneur. In the future, she wants to try again, but taking into account all the lessons she learned in Jackson Heights. “I don’t think it was a failure,” she said. “It was just at the wrong time. It’s water under the bridge and I have learned from my mistakes.”
