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Small businesses face grim outlook as government aid runs out

The $349 billion federal relief package for small companies ran out in less than two weeks, leaving many mom and pop store owners shut out after spending days desperately trying to get a lifeline for their business and employees.

By Emma Kinery, Edward Ludlow and Saijel Kishan, Bloomberg

This week marked the first full month of lockdowns for many small businesses across the U.S., with no prospect of life getting back to normal anytime soon.

The $349 billion federal relief package for small companies ran out in less than two weeks, leaving many mom and pop store owners shut out after spending days desperately trying to get a lifeline for their business and employees. Among those who succeeded in getting a government-backed loan, some say they fret about an uncertain future past the two months of relief the program provides.

With efforts stalled in Washington to provide more funding, reality on the ground is often grim, particularly for very small businesses with a few employees. The median firm with monthly expenses of $10,000 has only enough cash on hand to last two weeks, according to in a recent survey published in a National Bureau of Economic Research paper.

Millions of business owners across the country are struggling to get by. Their voices are rarely heard. Some are contemplating shutting their businesses, others are looking ahead at an eventual reopening. Here are some of them, reflecting on the month past and looking at their future:

Ordering thermometers

At 9.25 a.m. on April 3, Bobby Lance got an email from his bank telling him to get ready for the government’s small business lending program that was about to go live online in five minutes. He then spent the next 60 minutes at his computer furiously clicking on his mouse to submit his application. “It was an anxious time,” he said of the early days in April, adding that he sometimes drank two glasses of wine to help calm his nerves.

Those days almost seems a distant memory now. Lance, who owns Sweet Dreams Ice Cream Café and two other food businesses just outside Disney World in Orlando, Florida, has since applied for another government loan, got up to speed with everything from pathogens to virus testing, and shared what he has learned with other business owners. And now he’s focusing on business in a post-lockdown world.

While Lance waits to hear whether he’ll get federal funding, the 66-year-old is preparing for an eventual reopening. He has ordered masks and plastic face shields for his five employees, thermometers to check their temperatures and looked into “hospital quality” sanitation training for them, he said. Lance has also got quotes from sanitation companies to perform more regular deep-cleaning of his 1950s-style ice cream cafe and he’s started designing plexiglass dividers for its back-to-back seating booths.

“You’re numb at first, but then have to carry on and be positive,” he said. “I’ve been in business for 42 years and I couldn’t live with myself if I caused someone to get sick.”

Painful layoffs

Justin Catalana, the founder of San Francisco-based Fort Point Beer Co., took painful and early action in the face of COVID-19.

Over the weekend of March 13, ahead of Bay Area cities announcing shelter-in-place orders, the brewer laid off 70 of its 200 staff and shuttered the three bars and restaurants it owns. The layoffs continued through March and were done so staff could seek unemployment insurance. As of Friday, the company had 65 employees.

Sales to the city’s bars and restaurants have completely dried up. But there is one bright spot: Business with grocery chains and corner stores are up significantly.

“We will mold the business around whatever is generating the most revenue,” Catalana said. “We hope that we are going to be operating at around 40% of what our revenue was projected to be for the next couple of months.”

Catalana’s plan is based around the shelter-in-place orders lasting at least 12 weeks, through to the end of May.

The company applied for the federal Paycheck Protection Program rescue fund and received confirmation the loan’s been approved. However, it has yet to receive any funds. It also applied for the other federal program, called Economic Injury Disaster Loan, and is still waiting on those funds.

Catalana has also continued to pay rent across his three retail locations, including a prime spot on the front of San Francisco’s Ferry Building. His hope: he will be able to reopen all three of the bars and restaurants and hire back the staff, eventually. He is in talks with landlords over relief.

`Keeping me up at night’

John Dantzler has been working on the business plan for his own restaurant and brewery since 2008. He was days away from opening in Manhattan’s SoHo neighborhood when coronavirus hit.

“In a lot of ways, it was pretty rough timing for us,” he said. “We basically shifted our entire business model overnight.”

Now the CEO and co-founder of Torch & Crown Brewing Co. has morphed his restaurant property into a distribution hub and is so far keeping his 20 employees busy with beer deliveries in New York.

Dantzler himself also is bringing brews to people stuck at home with his 2003 Lexus SUV — an old car that “roars” and already has 215,000 miles on it.

“You can fit a lot of beer in that, we’ve learned,” he said. ”It’s definitely not how we drew it up in the business plan a few years ago. But it’s getting the job done.”

Delivering 4-packs of brew is helping for now, but revenue is just 40% of what it would have been. Dantzler has been approved for between $150,000 and $200,000 through the payroll protection program but says he’s unsure if it will come through because he keeps reading about how all the funding has been used up. And even if he does get a check, it will only last him for about a month of staff salaries.

“It’s keeping me up at night,” he said. “What happens when the money runs out — and we still don’t know if we’ll be open or not.”

`Really frightening’

John Naekel co-owns four bars with two other partners in Portland, Oregon. All of the bars have be closed with all hourly staff laid off since March 16. Initially, he kept salaried managers for two weeks with the hope that it would be brief but had to lay them off as well.

The process of applying for federal rescue loans has been confusing and frustrating. The loans in the payroll protection program, designed as a short-term stopgap until the economy reopens, convert to grants if proceeds are used to cover salaries over about two months and other approved expenses such as rent. It created a conundrum for many business owners whose locations are shut down under state orders: Shall they rehire their workers?

“We can’t pay them to do nothing, and we don’t know when are going to reopen,” Naekel said earlier in April. “What if we come back and the new rule for bars and restaurants is they need to operate at half capacity and stay six feet apart — our business model is we can’t operate at half capacity. If that’s where we are headed, then it may not make sense to ever reopen. I don’t care what amount of money if we can’t reopen. That part of it is really frightening.”

`Wizard of Oz’

Erik Bruun owns SoCo Creamery, an ice cream shop and wholesale supplier in Great Barrington, Massachusetts. He was told Monday, April 13 that his application for a Paycheck Protection Program loan had been approved, but he has yet to receive any funds.

“I’m very grateful for it, and I understand that these things take time, but there’s a clock that’s ticking for my business and I have to take different steps to hold back time until the loan comes through,” he said. “The lender I work with couldn’t be nicer, couldn’t be more responsive, but she’s in front of a system that you can’t see behind. The money is coming from the Wizard of Oz.”

He rehired some of the part-time workers, based on getting the government-back funding. He believes he’ll get the funding at some point but is overcome with a sense of uncertainty in general.

”When and how we will get back to a new normal is the question,” he said. “As an ice cream business, we look forward to summertime, and there’s always this feeling that summer may never come.”

`Nobody’s Lending’

Lisa Leder is a casting director and photo producer who has worked with companies of all sizes — from small businesses to Estee Lauder Cos. and Levi Strauss & Co. She has owned and operated LL Production and Casting in New York City since 2005.

“I had money and was doing amazing in March,” Leder said. “Everything was halted on March 12, so all of the money I was counting on to pay people from is gone. I’ve never been in this situation before. I’ve never been late in my life paying a vendor.”

Leder is the sole employee, which has complicated getting aid. She’s applied for every loan she possibly could: the Paycheck Protection Program and another federal program called Economic Injury Disaster Loan, as well as New York City programs. She’s heard nothing.

The way her business operates is she usually gets a budget from a client and money in advance, and then pays people to do the job. At this time last year, she had brought $70,000 in gross for the month of March. At the beginning of the month, she had brought in $13,000 and is now stuck trying to come up with the $50,000 she estimates she owes.

The past month has been nerve-wracking and infuriating. When she called the Small Business Administration a week and a half ago and asked about the status of her application, the representative replied he “had no idea” how to check the status, she said.

“Nobody’s lending,” she said. “Unless you’re really rich or really poor, you get nothing.”