Beloved businesses are going bankrupt waiting for federal help. It will get worse

Republicans and Democrats are still holding out for their preferred relief deals, and legislation could be delayed until President-elect Joe Biden takes office.
Image: Outbreak of the coronavirus disease (COVID-19), in New York City
People walk past a business that is closing in New York City on Aug. 17.Carlo Allegri / Reuters

Last Friday, as Americans waited to learn who their next president would be, Debbe Andrews-Lewis of Lincoln, Nebraska, knew her life was about to change either way. At the end of the day, she would lose her boutique, The Funky Sister.

She had built it from scratch to honor her late husband's memory — they had always wanted to run a store together in retirement. She found quick success selling antiques and oddball items, which allowed her to expand the business and hire her daughter, who took her young son to work every day.

But then the Covid-19 pandemic hit, shuttering the store for two months last spring. When Andrews-Lewis reopened, a loan from the Paycheck Protection Program — part of the emergency relief bill passed by Congress in March and signed into law by President Donald Trump — covered only a brief stretch of her daughter's salary.

She hoped for more help from Washington, but it never came. And with street traffic way down, more residents buying online and little sign of improvement on the horizon, it was no longer tenable to continue.

"When I looked at the lease, I just couldn't justify allotting another $100,000 for rent and utilities for three years," she said.

The election may be over, but the White House and Capitol Hill are no closer to terms on a new Covid-19 relief plan. And even if a deal is reached, it's far too late to help save as many as 100,000 small businesses that have been forced to close while waiting for more help, like The Funky Sister. Neighborhood shops around the country are in mortal danger every day Washington fails to act.

"Many small businesses are drowning right now," said Sung Won Sohn, an economist at Loyola Marymount University in Los Angeles. "They have very little financial cushion to begin with, many of them have hand-to-mouth operations, and they have no place to turn to except the government."

The situation is grim. Local news outlets are filled with stories of beloved institutions going under for good as they face a raging winter coronavirus outbreak, the specter of new health restrictions and no sign of federal aid to help carry them over into brighter times when a vaccine may be available.

From a famed New York City barbershop to an influential music venue in Athens, Georgia, the NBC News audience has shared the names of nearly 200 favorite businesses they've said goodbye to in recent months. It's a list that undoubtedly will grow.

But the government isn't moving. While there's little dispute in Washington that aid is needed, the White House and Democratic and Republican leaders are far from an agreement. Even though key parts of the last financial stimulus package expired more than three months ago, each side is still holding out for what it hopes will be a better deal.

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The Democratic-led House in May passed the HEROES Act, a $3 trillion relief bill that Senate Majority Leader Mitch McConnell, R-Ky., refused to take up, saying it was too large. McConnell instead pushed for a $500 billion bill, which Democrats said was far too narrow. House Speaker Nancy Pelosi, D-Calif., and Treasury Secretary Steven Mnuchin, meanwhile, have failed to reach a deal in the $1.8 trillion range.

McConnell, fresh off his re-election, has said that he would try again to pass a more limited relief bill that included support for small businesses but that he wouldn't accept the "absurd multitrillion-dollar socialist wish lists Democrats have demanded."

Trump, still stewing over an election loss that he has vowed to fight, is an unpredictable factor in negotiations. Over the last several weeks, he abruptly ended and restarted talks and has shown little interest in addressing the crisis since Nov. 3.

In the meantime, according to the business listing site Yelp, 60 percent of stores that have closed since the pandemic began have done so for good.

More than just represent losses to their communities, the closings could compound the economic damage of the coronavirus and lengthen the recovery. It's far easier for a business that survived the pandemic to rehire once conditions improve than for bankrupt owners to start over from scratch.

"I think that permanent damage has already been done and more damage will be done unless we do something," Sohn said. "Unfortunately, Washington is gridlocked."

The wreckage is everywhere.

In Wilmington, North Carolina, Dock Street Oyster Bar managed to survive a barrage of hurricanes over the last 21 years. Owner Steve Maillard said it was rescued from one early low point by the teen drama "Dawson's Creek," whose production crew became late-night regulars.

But last month, Maillard decided he couldn't justify taking on debt to keep going, given diminished business and uncertainty about whether health rules would allow him to stay open with enough capacity to break even. It didn't strike him as fair.

"When you shut businesses down, I don't care what side of the aisle you're on, you got to help them get back up," he said. "I've paid several million in taxes, and you saw the misuse of it going to the big corporations that don't really need it and people like us going without."

The economic environment is especially fraught for restaurants, bars, theaters, gyms and other indoor businesses, which are facing revenue losses from a double whammy of stricter health rules and customers who are more likely to eat at home and avoid outdoor dining in the winter.

Health officials are pushing state and local leaders confronting rising numbers of Covid-19 deaths to close or scale back indoor dining, but without funding from Washington to reimburse owners, they're forced into a cruel choice between containing infections and destroying community businesses.

"Small businesses dominate the service sector, which is where human contact is an essential part of the business," said Bill Dunkelberg, chief economist for the National Federation of Independent Businesses.

For some owners, luck is as much a factor as anything else. Muriel Altikriti closed up a New Orleans bar, Lost Love Lounge, after it became impossible to turn a profit under tight restrictions.

But another bar she co-owns just a few miles away, Pirogue's Whiskey Bayou, is holding strong thanks to a larger outdoor space and a clientele that's more amenable to socializing in the pandemic.

"If you have a bar with a courtyard, you're great right now, but so many bars don't have that," Altikriti said.

Even as lawmakers acknowledge the threat to businesses, bipartisan bills to provide over $100 billion in grants and loans to independent bars, restaurants and theaters have so far failed to gain traction. Federal aid — even if it's approved this month — could take weeks or months to be delivered.

Altikriti said that she was aware of pending legislation in Congress that might help but that it was impossible to hold out any longer with looming rent payments she was unable to negotiate any lower.

"I couldn't base anything on not knowing what was ahead. I could only look at the next month or two in my picture," she said.

Zaidy's, a family-owned Jewish deli in Denver known for its matzo ball soup, also closed its doors in October still hoping for relief.

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Jason Rudofsky, whose father founded the restaurant in 1985, thought the business was well-positioned to survive at first, and he had little trouble getting a paycheck protection loan. He credited state officials with taking appropriate health measures and communicating them well.

While the restaurant struggled to implement the rules and adjust to new customer habits with limited capacity and staff, he assumed that more federal loans and grants would help cover the difference. Instead, it slowly dawned on him that Congress and the White House had other plans.

"I just sort of saw the writing on the wall, that we weren't going to get any money in the near future," he said. "They care more about their election, and they don't realize what's happening in America."

CORRECTION (Nov. 13, 2020, 4:45 p.m. ET): An earlier version of this article misspelled the last name of the owner of Zaidy's deli. He is Jason Rudofsky, not Rudowsky.