For some small businesses, closing down is a better choice than opening up

One restaurant owner said he's worried about forking over thousands of dollars to restock, only to have a few people trickle in for takeout orders.
Image: Jim and Marilyn Ridel eat their take out lunch in the parking lot outside the restaurant amid the coronavirus disease (COVID-19) outbreak in Keene, New Hampshire
Jim and Marilyn Ridel eat their takeout lunch in the parking lot outside the restaurant amid the coronavirus disease (COVID-19) outbreak in Keene, New Hampshire, April 19, 2020.Brian Snyder / Reuters file

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By Leticia Miranda

After three months on lockdown, many states are gradually opening up for business, signaling relief is near for thousands of stores and restaurants whose sales have dropped to zero. But while some can dust off and pick back up again, others simply can’t afford to reopen their doors.

“Social distancing really requires proprietors at restaurants to maintain a much smaller number of people than before,” said Hunter Stunzi, senior vice president of small business at LendingTree. “If you want to reopen, you’re looking at smaller revenues compared to a bustling restaurant.”

Nearly half of small-business owners worry they cannot afford to carry on with normal operations once state stay-at-home orders are lifted, according to a LendingTree survey of 1,260 small-business owners published in May. About 46 percent of small-business owners said funding is the primary challenge to reopening and that additional health and safety measures could further stifle sales.

Tim Guinan, the CEO Of Otherworld OCR, a gym based in Frederick, Maryland, told NBC News that he has about two months left before he’ll be forced to close his business. Beginning Friday, Maryland's phase two rules will limit fitness classes to either 50 percent of the minimum occupancy, or 50 people. Regardless, Guinan isn’t convinced people will be comfortable enough with going back to the gym any time soon.

About 46 percent of small-business owners said funding is the primary challenge to reopening and that additional health and safety measures could further stifle sales.

“We are picking up some people and starting a ninja [obstacle course] program,” he said. “But some parents are weird about it, some are like, ‘Get them out of my hair’ and some are like, ‘We need to protect little Johnny’ — and I understand both.”

The landlord for Guinan’s gym hasn’t offered any concessions, leaving him responsible for about $8,400 every month, just to keep the property. If Virginia is hit with another wave of coronavirus, he’ll have no choice but to shut down.

“I’ll have to pull the plug,” he said. “I’ll have evaporated my personal savings and I’ll need to go on Social Security.”

Small business owners entered the pandemic with already stretched balance sheets. A JPMorgan Chase Institute study of 1.4 million small urban businesses in September found that 29 percent of the businesses were not profitable. Nearly half of those surveyed had no more than two weeks of cash on hand.

The government’s initial round of the Paycheck Protection Program was marketed as relief for small businesses who could not afford to keep workers on their payroll under the economic stress of the coronavirus. But since its inception, the program has been riddled with chaos and favoritism towards mid-market businesses who have existing relationships with large banks. It also doesn’t yet include coverage for costs that businesses incur for buying additional cleaning supplies and personal protective equipment for employees, such as face masks and gloves.

Alex Love, the owner of Sauced, a restaurant based in New Riegel, Ohio, told NBC News that he applied for a PPP loan and received $8,000, which would only cover two weeks of costs. He anticipates his business will only last through September.

On a regular Saturday night, the three-year old restaurant would be packed with people who traveled from as far as Toledo to see a band perform or to drink on the patio during one of Ohio’s warm summer nights. But during the shutdown, the restaurant freezer and walk-in refrigerator broke down, adding $10,000 to the business loss in sales. Love said he’s also worried about forking over an additional $10,000 to restock, only to have a few people trickle in for takeout orders.

“They should have structured the [PPP] plan better,” he said. “They were just handing out money to people who didn’t need it.”

At best, Love said he will be able to sell the business at an auction and cover half the cost of losing the business. But that still leaves his family with $200,000 in debt.

“I had the American dream,” he said. “I fear it may live on for others, but for me it will always be tarnished.”