‘Haven’t seen a dime’: five small businesses on the struggle to survive a pandemic

LeAna McKnight survived Hurricane Katrina, and now she’s fighting for her business to survive Covid-19.

“Once you’ve lost everything, including your home, nothing stresses you out too much,” said McKnight.

Like millions of small businesses across the US, McKnight’s Stylist Lee Hair Studio in West Hollywood, California, had to close indefinitely in mid-March because of stay-at-home orders aimed at curbing the spread of the coronavirus.

And like fellow entrepreneurs around the country, she is struggling to figure out how her salon will rebound from the crisis whenever she is able to reopen.

The Small Business Administration loan programs established under the federal Coronavirus Aid, Relief, and Economic Security Act were meant to provide a lifeline for businesses like McKnight’s. But the effort has been overwhelmed by the needs. The $350bn set aside for SBA Paycheck Protection Program (PPP) loans was exhausted before many small businesses were even able to get overwhelmed bank systems to accept their applications. And at least some of the loans went to businesses most would not consider “small”, including the restaurant chains Ruth’s Chris Steak House, Potbelly Sandwiches and Shake Shack; multimillion-dollar publicly traded biotech companies; coal producers and hedge funds.

While elected officials and policymakers look to add as much as $500bn for additional loans, some small business owners say the program isn’t just underfunded but fatally flawed. The PPP is only forgiven if at least 75% of the money is used to cover payroll costs – leaving little for business supplies, rent, or utilities. What was first announced as a forgivable $10,000 advance on an SBA Economic Injury Disaster Loan (EIDL) was changed days later to $1,000 per employee a business previously had on staff.

Small businesses on the west coast appear to have had a particularly hard time securing aid. According to two analyses of how SBA funds were allocated, California, Oregon and Washington received some of the smallest shares of aid compared with the eligible payroll in each state.

Each of the country’s over 30 million small businesses has unique needs and challenges in the face of a common disaster. Five owners on the west coast told the Guardian how they’re working to stay afloat.

The hair studio: ‘I won’t lose everything again’

To McKnight, government aid has so far proved elusive: “I’m living off my savings,” she said.

McKnight’s small studio, which specializes in natural hair and extensions, opened in 2014 and is largely a one-woman operation. She works with a remote assistant and an agency that helps book her clients, but she has been forced to pause those relationships.

In normal times, her total costs per month, including rent, are roughly $7,000, and she typically makes between $3,000 and $4,000 a week. Her online leather business is on hold due to manufacturing shutdowns. That means her only continuing source of income is her online hair products store. She’s on track to lose roughly $5,000 a month.

McKnight applied to the PPP loan and the EIDL advance but hasn’t yet had luck. She also applied for unemployment but has not been approved, and she hasn’t yet received her stimulus check. Even if the loans came through, she would suffer thousands of dollars of losses each month the lockdown continues.

For now, McKnight is staying optimistic, noting that her clients are desperate to get back into the salon. “I promised myself I would not lose everything again,” she said.

– SC & SL

The taco shop: ‘We don’t operate with hundreds of thousands in our bank account’

Guerrilla Tacos, too, overcame huge obstacles to open in 2018. Chef Wes Avila started Guerrilla as an unauthorized Los Angeles food cart that was repeatedly shut down by police. After officers threatened to confiscate his supplies, he turned the business into a truck, eventually transitioning to a brick-and-mortar location.

It was a “miracle” that Guerrilla had thrived even this long, said Brittney Valles, managing partner who opened the restaurant with Avila. Valles fundraised for the taco joint when she was only 23 years old, and she is the first in her family to graduate college. “People took a chance on me.”

The shutdowns have sent the owners scrambling: “We don’t operate with hundreds of thousands in our bank account. We don’t have this crazy backing of capital and tech to maintain a business in a pandemic.”

Valles previously employed 58 people. Now, doing take-out and delivery only, the restaurant is down to seven employees (plus her boyfriend, who is working for free). She furloughed the rest of staff.

Guerrilla’s rent is $25,000 a month. In February, pre-Covid, the restaurant made $400,000 in sales. That dipped to $150,000 in March, and she estimated April would bring in $60,000 or less. She successfully secured the disaster loan and was told she was approved for PPP, though that money hasn’t arrived yet.

Ultimately, with an eviction moratorium in place, she held off paying rent to instead cover healthcare for her furloughed workers. While she may be in a better position than other taquerias, the long-term future is uncertain, especially if she has to operate with reduced tables or other restrictions.

She did not plan for a pandemic when she negotiated rent, she said, and fears her landlord would quickly replace her with a more financially stable chain if she continues to be short.

“It feels like my entire dream and all the people who work for me and alongside me are all just getting fucked. It’s so exhausting,” she said.

For now, Guerrilla is offering “emergency taco kits” to go, which provide customers with ingredients to make their own tacos at home. One of the chefs is also offering a specialty dinner each week. First up was a nod to Ruth’s Chris, the American steakhouse corporation that received $20m in loans, and a lot of backlash.

– SL

The cupcake bakery: ‘Applied for every loan and every grant’

When a car careened into the front of her tiny Oakland, California, bakery in early 2019, Jen Angel thought she’d been through the worst of it as a small business owner.

Angel established the business with a catering and events service and opened the first storefront in the spring of 2016. Almost exactly four years later, the parties, corporate events, weddings and other advance orders that make up the majority of her income dried up in mid-March. Sales dropped from an average of $18,000 a month to about $4,500 at the start of what is usually the busiest season for Angel Cakes.

“Aside from Valentine’s Day, January and February are really slow, so we work hard in the spring and summer to make sure we have enough cash flow in the winter,” said Angel.

Angel spoke while prepping in her small kitchen for the weekly orders that are still keeping the business afloat, clearing nearly all monthly rent, insurance and utility costs. It’s work she does entirely on her own now, having been forced to lay off five part-time employees not only because she couldn’t pay them, but because there’s no room for more than one person to work in the Angel Cakes kitchen at a time and stay at a safe distance from anyone else. Those workers are now receiving unemployment benefits, but Angel is drawing no personal income.

“I have basically applied for every loan and every grant,” said Angel, from the US Chamber of Commerce (full) to a Facebook small business aid program (no response yet) to a City of Oakland grant for low-income business owners (rejected). “They said they had $5,000 to give to 90 businesses, and they received 1,200 applications. Every program is overwhelmed.”

Angel did receive a $5,000 forgivable advance from the EIDL emergency grant, $1,000 for each employee – “The way I found out I got it was it just appeared in my bank account. There was no email, no letter, nothing.” But she hesitated to apply for the larger PPP loan.

“What if the shelter in place order goes past June 30? What if some of my employees have different jobs? They might have moved, they might not be available. What if I can’t get back up to my previous payroll? As somebody who has no cushion, the idea of taking on debt with the chance it’s going to be forgiven, but might not, is just not an option,” said Angel.

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A $15,000 zero-interest loan from the not-for-profit Kiva will help cover what costs she can’t make in her weekly orders, but it’s still debt she’ll have to pay back once the business is truly up and running again – a timeline that remains vague at best.

“As a small-business person, I always think: this is the year I’m going to get ahead and have some savings,” Angel said. “After having built the business for 10 years, it’s just such a disappointment that it’s still a struggle even though I’m doing everything else right.”

– SC

The yoga studio: ‘We don’t know when people are going to feel safe’

Stacey Sampson started teaching body-positive yoga classes at a local community center in Spokane, Washington, a few years ago. The response was so enthusiastic, she said, she was soon looking for a space of her own.

Sampson, 38, rented and renovated a studio and brought on two other yoga instructors to help her teach daily classes. Before coronavirus shut the studio last month, it had grown to about 100 members: not the biggest yoga studio in town, but one that offered “a niche that was not being met”.

Since the shutdown, Sampson has continued paying her instructors to offer members or drop-in customers the same classes, now livestreamed. But attendance has dropped. “People have had to cancel memberships,” Sampson said. “It’s a luxury they can’t afford right now.”

Shifting a yoga studio online “is a model that works in theory”, she said, but so far, the math isn’t adding up. The rent for her studio is still $1,100 a month, plus another $250 in utilities. Drop-in classes online are still $15 each. A year-long membership is $600.

Sampson has applied for emergency assistance, including a normal Small Business Administration loan, and the EIDL emergency grant, which promised up to $10,000.

“The application said that we would have funding within three days, and that didn’t happen,” Sampson said. A week later, she heard there had been problems with the system and that she should apply again, so she did. Once again, nothing. “I still haven’t seen a dime.”

Because she runs a very small business, and one that works with independent contractors, not employees on payroll, the government relief programs aren’t really designed for her, Sampson said. She’s still waiting to see if she will get individual pandemic unemployment support from Washington state.

“Every road I’ve gone down has hit a dead end,” she said.

Sampson has been told her landlord is willing to work with businesses to find a way through the crisis, but she is still waiting to hear more. Some of the studio’s supporters have stepped up with PayPal donations or early membership renewals, “which is amazing, but so far it’s not been enough”.

Being a relatively new business is particularly challenging. “If you’re a more well-known business in the community, you’re more likely to get the help you need,” she said.

And even if the shutdown ends soon, Sampson said, she will still face uncertainty: should she reopen the studio and risk the chance that an instructor or a customer might spread the infection? Will people still want to sweat together in a crowded room, even once legal restrictions are lifted?

“We don’t know when people are going to feel safe to be in my type of space,” she said.

– LB

The bookstore: working seven days a week

Since it was founded in 1981, Jan’s Paperbacks has always been owned by women. Its romance novel section is 20ft long.

Its owner, Lori Carroll, bought the bookstore in 2018 from a friend who had been struggling to find another buyer. “I just wanted to keep the store open,” Carroll said. “I want independent bookstores to survive.”

Even before the pandemic, Carroll had been running the store, in Beaverton, Oregon, as a one-woman operation. In normal times, her sales barely covered her costs: $3,000 a month in rent and another $3,000 a month in other expenses, including paying off the loans she took out to buy the business and move it to a new location. She has done other work on the side, including editing and dog-walking, to support herself.

During coronavirus shutdowns, Carroll has actually seen the bookstore’s sales go up, as she has shifted her business model to offer curbside pickups, books by mail, and very socially distanced browsing, with only one customer allowed inside the store at a time. (Anything a customer touches but does not buy must be put on a special table, to be disinfected later.)

“I’ve gotten a ton of new customers,” she said. “They walk in and they just say: you need to stay open.” She’s been given a $20 tip on one order, a $60 tip on another. “Somebody mailed me a check for $100.”

Carroll is now working seven days a week. With the growing sales, her expenses, too, have shot through the roof since many customers are now ordering new books, which Carroll has to pay to order herself, rather than the used books that are already in her inventory.

“For March, I was able to pay my rent [on time] but not my utilities,” Carroll said. Her landlord has offered her some flexibility, she said, but he also has bills to pay.

Carroll said she received an EIDL emergency grant from the federal government in her bank account a few days ago, but it hasn’t helped much. After she applied for the grant on 31 March, she said, she was told the emergency fund would only offer $1,000 per employee. That meant, for her, exactly $1,000.

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“I find it humorous,” she said. “You said it was going to be $10,000 in three days, and it became $1,000 after three weeks.”

She was told she had been approved for a normal SBA business loan of $25,000, but she is still waiting on paperwork to complete the loan.

While access to government assistance has been frustrating, she said, small businesses in downtown Beaverton have stepped up to help each other. From her bookstore, she is selling cookies for a local bakery and skincare products for a boutique.

On the day the federal government announced it had run out of emergency funding to help small businesses and was not accepting any more applications, Carroll tried to offer some consolation to her banker across the street. “I was like, here’s some cupcakes, enjoy,” she said.

– LB

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