The federal government is begging small businesses affected by Hurricane Sandy to consider what it’s offering. Relief assistance, including low interest loans by the Small Business Administration, is being turned down by these business owners who are still overwhelmed with the new reality of life after the super storm. Many say they were over extended before the storm and fear another loan will only add to their burdens. They’re unsure of the economy, and they say taking on new debt, regardless of the low interest rate, just isn’t realistic at this time.
More than 100 small business owners attended a standing room only meeting in Brooklyn on Thursday to hear what the government had to say. Government backed loans of up to $2 million with 30 year terms if they choose, along with low interest rates that are capped at 4% all sounds just fine and dandy – they’re just not interested. Yes, they say, it’s a great deal and yes, they are aware it’s the government’s most powerful tool for ensuring community growth and they know it’s important to rebuild after the storm. Still, they’re not interested. Even bridge loans of up to $10,000 were passed up, too, even as officials “repeatedly urged attendees to look hard at the SBA program”, as one journalist in attendance noted. “Most of us are deeply overextended as it is,” said Monica Byrne, the co-owner of local restaurant Home/Made.
We’re all shut down. We have staff we can’t pay. We really need some support that’s not about loans.
Even in a stronger economy, small businesses walk a fine line with even finer profit margins and the tiniest disruption can make the difference in terms of which side of the razor’s edge they fall on. They struggle to balance their cash flow, payroll, taxes, insurance and other expenses. The most seemingly insignificant detail can mean the difference in success and failure. Hurricane Sandy was anything but insignificant and now, small business owners are shell shocked and can’t imagine making a long term financial decision at this stage of the game. As one in attendance said,
Yes, it’s fast cash. But it’s cash that has to be paid back and we just don’t know if we could maintain that kind of obligation at this stage of the game.
“Money,” said Mike Ikhmies, the owner of commercial printing firm Eye Graphics & Printing. “We need money.” Money with no strings attached, mind you. Many are hoping this can come from their insurance policies; already, though, it’s proving to be a difficult concept. Flood insurance hasn’t exactly been an easy process for those in that region of the country; after all, insurers are hesitant if not downright resistant to offering these policies considering the many flood zones in many areas. It’s likely, too, these business owners are facing some of what Katrina victims faced: a battle over flooding versus wind damage. Many said wind-driven rain is what ruined their homes and businesses in 2005; the insurers called it flooding, though and as a result, they were off the hook for payments.
For those who could find a company to provide flood insurance, it was often woefully lacking. In some instances, business owners were only offered half a million in coverage, even when they had multi-million dollar equipment. Now, not only are the businesses ruined, but employees are unemployed and business owners are left with nothing.
Officials in New York officials are promising business owners they’ll cut through the red tape so that help can be provided immediately. But bypassing things like sanitation rules and allowing restaurants and shops to pump water out into the streets and use city services to haul away debris, it’s still not going to be enough for the long haul. Meanwhile, city aid workers are hunting down generators, fuel and cleaning supplies for business owners. Cash, however, is the one thing that’s most needed and the one thing that’s not being offered without taking on more debt.
Refinancing might help some, but the one thing officials are pushing: SBA loans are the one thing that will prevent refinancing as being a realistic option. SBA rules prohibit using disaster loans to pay off existing debt, according to agency spokeswoman Carol Chastang. They’re intended only to cover damage and economic losses directly stemming from the disaster. The New York Commissioner of Small business Services, Rob Walsh, says he understands business owners need more than loans; he says, however, he simply has fewer alternatives of offer other than what SBA is extending.
“We’re facing debts we no longer can pay, including a $4,800 American Express balance and more than $2,000 on my Visa” said one small business owner, “another loan will only ensure my complete failure. I need my insurance policy to keep its promise”. It’s a common theme being vocalized by small business owners up and down the east coast.