“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.”
The U.S. Small Business Administration offers low-interest disaster loans of up to $2 million over terms as long as 30 years, and the loans are financed directly by the government and capped at a 4% interest rate.
Red Hook’s local congresswoman, Nydia Velázquez, urged attendees to look hard at the SBA program. New York City is also offering bridge loans of up to $10,000 for area businesses that need working capital fast.
But as CNN’s Stacy Cowley points out, that’s an added monthly expense many operators can’t absorb — especially if they’re facing heavy rebuilding costs and weeks or months without any paying customers.
“No one in this room has flood insurance,” said Jackie Summers, gesturing at his fellow business owners.
Mike Ikhmies, the owner of commercial printing firm, said he carries fire, theft, liability and other coverage on his 13-year-old printing business.
“They only went up to half a million,” he said. “The equipment cost $4 million, $5 million. What good would half a million do if things got damaged?”
Ikhmies sealed his building up as Sandy approached, but floodwater pushed through the windows, covering all of the shop’s printing presses in several feet of standing water, destroying a week’s worth of projects.
Ikhmies has 10 employees, several hundred thousand dollars in outstanding loans on equipment that might be wrecked, and no incoming cash flow to pay for any of it.
Jackie Summers, the CEO and co-founder of Jack from Brooklyn, an artisanal spirits business five months old, is trapped in the same hopeless situation. His entire inventory and all of his equipment were destroyed.
Summers has no flood insurance and no capital to draw on. “What keeps us afloat is selling stuff,” Summers said. “We stop selling, the coffers go dry immediately.”
Risk modeling estimates suggest Sandy’s damage will be as high as $50 billion, of which only $10 to $20 billion will be covered by insurers.
Cowley notes that when it comes to cash to rebuild there are very few options that don’t require small businesses to to go deeper into debt which they cannot afford.
Ikhmies confesses he can’t manage yet another loan on top of the $25,000 he’s already paying monthly for an equipment loan with more than a year left to pay off.
Refinancing might buy some businesses time, but the SBA’s rules prohibit using disaster loans to pay off existing debt. They’re intended only to cover damage and economic losses directly stemming from the disaster.
Other than loans, Rob Walsh, commissioner of New York City’s Department of Small Business Services, had few alternatives to offer.
“There’s contributions, promotions, benefits — it’s going to have to be the old-fashioned way,” he told those at the meeting who said they couldn’t afford to borrow more.
Spirits maker Summers said Red Hook’s business owners are pulling together to pool their resources: “It’s a community here, and I’m glad to be among friends.”
But Sandy’s damage may be beyond their financial means to repair.
In cases where business and homeowners find flood or sewage damage not included in their business or home-insurance policy, certain government programs can step in to help those in a declared disaster area.
The best way for business owners and residents to get the attention of the appropriate government agency is to register through the Federal Emergency Management Agency, or FEMA, by visiting disasterassistance.gov or calling 1-800-621-3362.