Small Business, Big Problem
Feb. 9th, 2009
By Sean Gaffney

Jessica and Larry Delgado had to turn to the last people they wanted to ask for help to finance their dream of opening a wine shop. Jessica's mother took out a second mortgage against her home while her father staked a loan against his own company to provide funding for the couple to take a risk that fewer entrepreneurial-minded Texans were willing to take in 2008: They opened a new business.

Facing waning consumer spending, difficulty finding financing and a general anxiety about the future, fewer Texans incorporated businesses in 2008 than the year before. Applications to create partnerships and incorporate businesses fell last year to 115,885 from 124,202 in 2007, according to filings with the Texas Secretary of State.

In McAllen, the decline was sharper with the number of new businesses falling to from 1041 to 821 in the same period. The risk of opening a retail business during the worst post-war U.S. recession just as Americans curb their spending is not lost on Delgado, whose eyes grew watery as she recalled the difficulty she and her husband encountered launching House.Wine.

"We tried (plan) A, B, C and worked our way on down ... it was very difficult," Delgado said recently at the store which offers boutique wines, high-end furniture and an affordable wine bar at117 W. Business 83 in McAllen. "My parents were the last people we wanted to ask for more money."

Unable to finding financing from banks that once funded his real estate projects, Antonio Villareal used his own money to open a Batteries Plus franchise at 1201 S. Jackson Road in Pharr in January — an investment that he is confident will net a profit. "In an age of increased portability, our society is dependent on batteries," he said. In tough economic times consumers will be more apt to replace batteries in everything from iPods to lawnmowers rather than buying a new product, he said.

The decline in small business growth threatens to further cement falling employment numbers. So far, the Valley has bucked national trends and continued adding jobs as the recession deepened despite rising unemployment which jumped to 9.1 percent in December 2008 from 6.8 percent a year ago — that figure does not account for job loss among Hidalgo County's tremendous illegal immigrant population.

Application for sales tax permits — another measure of business growth — also fell across the state in 2008 to 147,552 from 156,987 in 2007, according to the state's Comptroller of Public Accounts. In McAllen, that number fell to 1,200 last year from 1,307 the year before.

Raul Garza, director of the Pharr Economic Development Corp., said while there has been a small drop in new businesses, others, including Villareal, are still moving forward.

"It's not as dismal as it appears everywhere else," he said. "People are still moving forward ... we take it in stride." Betty Ramirez and her son Ramsey Ramirez opened Business Cards Plus at 801 Pecan St. in McAllen in early January. The pair already run Jump!, a family magazine, and MagX, an arts, music and culture periodical.

The office provides them a place to put together the magazines and meet advertisers. But two weeks after opening, no customers have walked through the door for the marketing services they offer.

Betty Ramirez, however, is not too troubled. The family magazine she publishes has lost some advertisers but still makes enough money to support itself. And it's a family business, so no one is getting paid a salary. Still, like all entrepreneurs, she eventually needs to turn a profit.

"I didn't have a single customer come in," she said. "But I can't blame anybody."

-- Sean Gaffney covers business, the economy and general assignments for The Monitor. He can be reached at (956) 683-4434.