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Clinton
W. Daley
BizJump
Magazine, 2002 |
s
we move forward in reclaiming our way of life as New Yorkers and
Americans, the heart-breaking struggles of local small business
owners to keep their business afloat have virtually gone
unnoticed.
About
two weeks after the devastating events of the Sept. 11 attacks,
I joined a task force whose goal was to conduct a needs analysis
of the affected businesses. For the next two weeks we would
interview dozens of small business owners in the downtown
Manhattan area.
The
businesses in the immediate vicinity of the world trade center
were still closed. Most of them destroyed by the debris and
soothe from the fallen towers. Although they qualified for the
Federal Emergency Management Agency (FEMA) assistance, small
business owners around the world trade center were still in
shock and in no mood to talk business. And even if their
businesses were restored via FEMA's assistance, there were no
customers left in the area. Most owners agreed that before the
attack, the World Trade Center (WTC) generated over 100,000 in
foot traffic on a daily basis; but now that number was reduced
to only a few curious spectators. Along with the twin
towers, customers had literally disappeared.
By
now other businesses in the downtown area had reopened. But with
the traffic generated by WTC gone, business was dismal.
With the exception of a liquor store, all retail business owners
that we spoke to had experienced at least an 80% decline in
sales--some as much as 98%. The latter group included a
distraught business owner of a stationery store that served over
30 clients in the World Trade Center. With his customers gone,
he did not envision being in business for more than 6 months. I
quickly did the numbers in my head and realized that he was
right. Having a monthly overhead of over $60,000, his cost
structure was too high to conduct business in this "post 9/11
economic climate." I noted that renegotiating lease
agreements should be one of the first items to be addressed. My
final stop for the day was at a discount clothing store.
According to the owner, he had been at that location for the
past 21 years, now it was all over. He had lost everything.
I
left downtown at 7 pm and was home by 7:38 pm. Tired and
overwhelmed, I fell asleep immediately.
On
day two, we were much more purposeful. We were now coordinating
the efforts of various Government and private agencies that had
responded to the needs of small businesses. See http://www.newyorkbiz.com/WorldTradeCenter/main.html.
Chief among them was the Small Business Administration (SBA),
which was providing working capital loans up to 1.5 million with
interest rates at about 4% to affected businesses. The SBA loans
fall in two categories: (1) Physical injury and (2) Economic
injury. Businesses that incurred physical damage were
eligible for both loan programs. Meanwhile all other businesses
in New York were eligible for economic injury. (This was later
extended to the entire country, especially for those out of
state companies that have a significant number of their clients
in New York)
The
SBA provides eligible small businesses with the working capital
needed to pay ordinary and necessary operating expenses that
they can't cover because of the disaster. These expenses
include fixed debts, payroll, accounts payable and other bills.
Since Sept. 11, SBA has approved more than $800 million in
disaster loans nationwide to businesses affected by the
terrorist attacks. Of that total, more than $405 million in
loans went to business owners and residents in New York City and
Virginia.
Although
many local politicians were clamoring for grants, these calls by
and large fell on deaf ears. Grants were scarce. And when
available, they were limited to businesses in the downtown area.
The major source of business grants came from the WTC Business
Recovery Grant (BRG) and the Small Firm Attraction and Retention
Grant (SFARG) funds, which were set up for small businesses
located downtown (below 14th Street). Ranging from $3,500 to
$5,000 per employee, these grants are awarded to affected firms
based on economic injury and the number of employees. According
to the New York City Economic Development Corporation, as of
July of this year, 7666 grant awards totally $215 million were
made to small businesses under the BRG program; meanwhile 124
grants were made in the amount of $7.6 millions under the SFARG
program.
Albeit
slow to respond, many businesses began to view the WTC
devastation as a temporary situation and in the true fortis
cadare cedere non potest (The brave may fall, but never yield)
spirit of New York, began to simultaneously rebuild their
businesses and their lives.
I
would have loved to tell you that after a year everything turned out
fine. But running a business is no fairy tale. Although
countless small businesses were able to stay afloat with the
financial assistance, many were not so lucky. Week after week, I
have witnessed the personal financial devastation of proprietors
who lost their life savings in their prematurely collapsed
businesses. Most disturbing was the saga of an ex-service woman,
who after 8 years of saving and planning opened her restaurant
on September 9, 2001.
Because
the economy had slipped into a recession prior to September
2001, it's hard to differentiate between the effects on
businesses of the attacks versus that of the recession.
Nevertheless, some sectors like retail, entertainment, travel
and tourism have been indisputably affected by the attack. In
2000, tourists spent over $17 billion in New York City. This
amount plummeted by 12.2% in 2001 and is expected to decline
even further by the end of this year. According to most travel
experts, the lingering fear of terrorism has kept most people
away from the City. Nonetheless, hoping to take advantage of the
generous City and State incentives, many small businesses are
beginning to relocate downtown-an early indication that
downtown is coming back to life.
Since
June 2002, we have been surveying visitors to our website (www.bizjump.com)
about the effects of the disaster on their businesses. Much to
our surprise, only 61% of the over 300 respondents believed that
their businesses were adversely affected by the disaster. 29%
thought that it had no effect; meanwhile 10% were uncertain. We
had expected the statistics to be far worse. But, it appears
that optimism has returned to the small business sector of the
economy. And just as it was in the early 90s, small business is
slated to once again rescue our economy from recession.
I
still keep in touch with most of the business owners downtown.
Last week, I called a business owner to see how things were
going with his business downtown. He was very optimistic.
"Thanks to Allah, more better than last year," he quipped.
By my estimations, more than 40% of the devastated small
businesses owners in the downtown were of Arabic decent. In an
ironic twist of fate, the attacks on America had devastated not
only American businesses, but also small business owners from
all over the world.
Being
an immigrant and having worked with entrepreneurs in many
countries, I can safely say that the United States, especially
New York, is one of the few places in the world where you can
move in today and start your business the next day.
Perhaps this is why the United States is still the best place in
the world to establish and grow your business venture.
Please
write me at Clinton@bizjump.com
with your comments. And remember, it is still not too late to
get assistance if you business was affected by the 911
disasters. Let me know and I will refer you to the appropriate
agencies. My firm is still doing pro bono work for disaster
clients. So contact me before this assistance dries up forever.
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