N.O. Small Business Owners Adapt to COVID-19 and Plan for the Future
NEW ORLEANS – Small business owners in New Orleans (and, yes, literally everywhere else on the planet) have been in crisis mode since mid-March as they struggle to replace lost income, try to take care of employees, pivot to provide new services and make educated guesses about how to survive in the post-COVID-19 “new normal.”
Federal Funds to the Rescue?
Many New Orleans business owners have already applied for federal help in the form of the SBA’s Paycheck Protection Program (PPP) and/or Economic Injury Disaster Loans – but they are having varying degrees of luck with the process.
Green Coast Enterprises, the real estate developer responsible for the Pythian Market, Hey! Cafe, Laurel Street Bakery and other projects, has seen quick results. The company’s COO Jackie Dadakis said she applied for PPP loans for three separate Green Coast entities through Fidelity Bank on April 3 and they received the funds on April 13.
“Fidelity was fantastic,” said Dadakis. “They worked through the weekend to get our applications in. We were approved by April 6 and we received the funds yesterday.”
But there was a last-minute plot twist.
“Fidelity sent cashier’s checks to us, which we had to take to the banks where we have our operating accounts,” she said. “One of our entities, the Pythian Market, banks at IberiaBank and we had no problems there. The two others bank at Chase, which put a 10-day hold on those two checks and we’re currently fighting with them to get it removed. The people at the local Chase branch are as frustrated and flummoxed as we are – they’ve been trying to get it removed all day.”
Two other businesses that saw a quick turnaround from the PPP loan process: Danielle and Richard Sutton, owners of St. James Cheese Company, applied through Fidelity on April 3 and received their funds on April 13. Blake Haney, owner of Dirty Coast and Bayou Brands, applied through JPMorgan for both of his companies. He received the funds for Dirty Coast on April 13 and is waiting for the other loan to come through.
Not everyone has enjoyed such a speedy loan approval.
Alonzo & Jessica Knox, owners of Backatown Coffee Parlour on Basin Street, applied for a PPP loan through their bank in early April and – after submitting several rounds of additional documents – are now waiting for funds. And Elizabeth Ahlquist, owner of Blue Cypress Books, didn’t apply at all.
“I’m with Capital One and they’re not set up to do PPP yet,” she said. “They are in the process of getting that worked out but I’m on the fence. … I’ve run my business for 12 years without a single loan so I don’t know if I plan on taking on debt considering that I don’t think the recovery is going to be swift.”
Jessica Knox has similar concerns.
“You have to see if it’s worth it to add more debt especially when you’re in your first five years,” she said. “You already have startup debt and you’ve planned for when you’re going to break even so adding more debt just prolongs the process.”
StayLocal, a nonprofit that advocates for independent local businesses, is hearing from its members that the Paycheck Protection Program has helped with the uncertainty but has some inherent flaws and doesn’t go far enough to protect small businesses, which make up more than 99 percent of all Louisiana businesses.
“New Orleans-based businesses need more assistance, easier access to that assistance, and less requirement to assume credit risk,” said Maryann Miller of StayLocal. “The PPP is an important stop gap, but doesn’t have enough money to meet the need, is channeled through a cumbersome process and lumps businesses large and small together to compete for the limited funding.”
Adapt or Perish
While they apply for federal help, small business owners are all adapting to the temporary COVID-19 reality.
Ahlquist at Blue Cypress has avoided furloughing any of her employees but she’s had to cut hours back and handle all book orders with virtually no customer interaction. She estimates her sales are about 25% of what they would be in normal circumstances.
“We take phone orders, social media orders and email orders,” she said. “Those are keeping us busy enough. We’re doing curbside pickup during shop hours. We’ve been keeping social distance. We have a table in the doorway – people can call in an order and the book’s waiting for them on the table. All payments are done online or over the phone.
“I’m making a quarter of the money and working four times as hard – it’s just the reality. Every transaction requires multiple emails and phone calls – nobody just walks in and pulls a book off the shelf anymore.”
Pythian Market, one of Green Coast’s most visible projects, has pivoted to providing takeout plus groceries. Dadakis estimates the food market is doing about 15% of its normal daily volume.
“We quickly pivoted through our restaurant distributor to having household goods like toilet paper and bleach so now you can order banh mi, tacos and your toilet paper and have it delivered on the same day for free,” she said. “Also, a couple days a week we’re feeding emergency workers for New Orleans and some contractors like Woodward.”
Haney of Dirty Coast and Bayou Brands is making similar adjustments.
“We’re adapting and surviving and finding other opportunities,” he said. “All 15 of our employees are still employed. The front line staff shifted to 80 percent of paychecks at least for the next two weeks. Managers are still fully employed and actively working on projects from home. Shipping has been steady thanks to a lot of e-commerce.”
The Uptown location of St. James Cheese Company, meanwhile, is actually producing about 50% of its normal sales volume thanks to takeout orders and online orders. The downtown location, more reliant on tourists and business lunches, has closed for the time being. About a third of the company’s 35 employees are still working while the rest are furloughed and ready to come back when the safety concerns subside and business picks up.
“We’re fortunate that we were already set up for takeout and we have an e-commerce site,” said Danielle Sutton. “But ultimately we have three components to our business: the restaurants, the retail and then the wholesale side, which supplies other restaurants. The wholesale portion has completely evaporated.”
I Can’t Pay the Rent … You Must Pay the Rent!
Paying rent or collecting rent is an essential part of the equation for many small businesses. The process has gotten complicated now that many commercial enterprises have been shut down and aren’t generating the income required to make their payments.
Green Coast Enterprises, for one, has several tenants who are currently in a tough position.
“We expect to have tenants who cannot pay rent for the foreseeable future so we’re likely to apply for an SBA disaster loan,” said Dadakis. “The PPP only covers eight weeks and we think we’re going to be impacted way beyond that period.
Dadakis thinks there is a “reckoning” on the way in the world of commercial real estate. And right now there’s no federal program to address the problem.
“Right now we’re seeing deferments but that still means the rent is due and we’re seeing deferments on debt payments but that still means the debt payment is due,” she said. “Your landlord can really only do as much as their lender is doing and most people started having these negotiations at the end of March when we thought this would be over in four to six weeks.
“Now it seems like even if we’re somewhat allowed back into work we’re not going to be allowed to pack into bars and restaurants, so people aren’t going to be able to pay their rent and landlords aren’t going to be able to pay their debt payments and some solution is going to have be found because at the end of the day if the money’s not there, the money’s not there.”
Jessica Knox of Backatown Coffee Parlour said her biggest expense is rent. Her landlord has been flexible but she doesn’t want to miss payments.
“Right now we’re having seventeen dollar days just trying to do takeout when we were having thousand dollar days before,” she said. “We’re waiting on loan money and then we’re gonna send the payment because we don’t want to get behind by two or three months.”
Ahlquist at Blue Cypress has another concern: “What if renters pay the rent but the landlords don’t pay their bills – who’s on the hook for that?”
Perhaps the biggest problem for businesses trying to navigate the COVID-19 era is that no one knows when it will end and what the business climate will be like when it does.
“I think [the future success of our business] is depending on what happens with New Orleans opening up again,” said Haney of Dirty Coast. “If there’s going to be support for local business, which I hope there will be, then maybe we kind of get back to normal. But tourism is important for our store in the French Quarter so I don’t see how I don’t bleed on that one for quite some time until tourism returns.”
Dadakis of Green Coast sums the problem up like this.
“I need a team of actual experts to put out a realistic timeline for what it’s going to look like to move around in society for the next 18 months,” she said. “And then I need to assess our businesses and decide what’s going to be realistic or not as far as projected revenue. And then they are going to need to backstop us – and by that I mean provide cash payments from the federal government.
“They can do that through massive unemployment insurance or expansion of the paycheck protection program but … there’s not any other source for this at this point other than the federal government. This is unprecedented but we need to make sure Americans citizens are going to be able to make groceries.”