Sandy-hit businesses: Reopen or shut down?

12. Superstorm SandyNo one would argue that nightlife 12. Superstorm Sandy

No one would argue that nightlife was among the least important losses caused by the storm, but Sandy's impact did rattle local bars and clubs to the core. Some suffered irreparable damage, and of those that did bounce back, many were shuttered for a week or more, unable to throw Halloween parties, which typically generate a critical chunk of a year’s income.

In hard-hit Long Beach, several bars became makeshift rescue stations; others organized benefits to help relief. Between food drives, concerts and fundraisers, the nightlife scene became a valuable part of the recovery effort. (Nov. 11, 2012)

Sandy hits Long Island Nightlife Photo Credit: Ian J. Stark

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Now comes the hard part for small businesses crippled by superstorm Sandy: to get up and running again.

A comeback depends on more than just resilience. For many it will hinge on access to financing -- and how often a storm-wounded community will frequent their shops or require their services.

"Business people need to step back, take a deep breath and look at the economics of what it's going to take emotionally, mentally and physically to reopen," said Larry Kushnick, a lawyer and vice chairman of the Huntington Chamber of Commerce. "But you really have to step back and think if it's worth it.

"For some small business owners, it's more than just the money, it's a way of life," Kushnick said.

 

'You work through it'

Marianne Ketcham, owner of Home Kingdom, opened her Port Jefferson gift shop on Black Friday, more than three weeks after Sandy pushed two feet of water into the store on Mill Creek Road, a few hundred feet from Port Jefferson Harbor.

Preparing it to relaunch meant repairing the water-damaged floor and walls, a task that Ketcham's landlord arranged, and moving in all the inventory she removed before the storm struck.

Ketcham said Home Kingdom was one of the last small businesses in town to reopen. Customers have been sparse, and she expects business will probably not pick up until closer to Christmas.

"You work a little extra hard, you give up something else, you tighten your belt and you work through it," Ketcham said.

Storms historically have wiped out a lot of small businesses. Up to 40 percent fail after being hit directly by a natural disaster, according to the Office of Disaster Assistance at the federal Small Business Administration.

Unlike larger companies, these businesses often operate on tight margins and with limited resources. Their survival is made more difficult because of the trickle-down effect of the weakened economy in which consumers are cautious about where and how they spend.

"Look, it was a tough economy as it was," said Pat Orzano, president of the Massapequa Chamber of Commerce. "You tell me where people are expecting to have extra money? This is a blow a lot of small businesses are not going to be able to handle."

It may take three to four months after a natural disaster, Kushnick said, before owners realize shutting down could be the only option.

 

Lack of power, not drive

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Michael Garguilo, owner of Garguilo's Bakery in St. James, didn't sustain any wind or water damage, but he said the loss of perishable goods and business when his shop was without power for six days cost him about $25,000. Power came back to the bakery Sunday morning after the Oct. 29 storm, and by the afternoon fresh bread and muffins were on the shelf. Garguilo said his decades-long relationship and credit accounts with his suppliers got him ingredients fast.

Although Garguilo said he hopes to make back what he lost through holiday sales and events at the bakery, he has filed an insurance claim for the full amount of his losses.

For those closer to the water, Sandy hit much harder.

When Evan Klein, the owner of Barrier Brewing on New Street in Oceanside, saw the damage Sandy caused to his brewery, he posted a message on Facebook telling loyal followers of Barrier that it would "be closed for the foreseeable future."

Up to three feet of water swept into the warehouse where Klein and business partner, Craig Frymark, brewed beer -- damaging inventory, the electrical circuits, a forklift and two delivery cars. Klein said the damage may add up to $100,000.

But the owners soon threw themselves into repairs. Two weeks after the storm, they were cleaning the warehouse and ordering new equipment. Klein said he is relying on business savings and contributions from family. He even got help from a fundraiser organized by Smithtown microbrew pub Tap & Barrel. The event, called "Barrier Relief," raised $2,000.

Klein said he decided not to try other financing options. "We can't really afford to pay a loan back with interest."

 

Bills keep coming

Another financial burden that businesses face: bills for utilities and rent, which continue to arrive following a period when no cash came in.

"I'm only a few weeks away from not having enough revenue in my business account to pay bills," said Carolyn Vella, the owner of Pretzel Stop Bakery in Oceanside.

When her store reopened two weeks after Sandy, Vella said few customers were buying. For Thanksgiving, Pretzel Stop had six orders for party platters, compared with about 40 last year. The store lost power, but since it suffered no property damage, Vella doesn't know if her insurance will reimburse her for loss of business.

For now, Vella has transferred $10,000 from her savings into her business account to keep her bakery going.

Even getting an insurance check may not end financial worries. Ilona Jagnow, the owner of Otto's Sea Grill in Freeport, said she received about $30,000 from the National Flood Insurance Program after Tropical Storm Irene brought the sea into her restaurant last year. The cost of replacing damaged equipment alone was more than $50,000.

Jagnow was negotiating a larger insurance payout for Irene when Sandy flooded the restaurant again. Otto's was able to resume operations right after Irene, but "with this one, we're done" for the holiday season, Jagnow said as she surveyed the restaurant the day before Thanksgiving.

Salt encrusted Otto's floor, which was stripped of a two-month old carpet, and the smell of musty seawater hung in the air. Remnants of a Halloween party -- fake cobwebs, pumpkins and spiders -- were scattered about.

"We're going to try to get going for next season, but we're losing our [holiday] parties," Jagnow said. The restaurant is typically closed in January and reopens in March.

 

A ripple effect

As businesses struggle, the effects ripple through the local economy. Raj Bhatia lost power at his six UPS stores on Long Island and has to replace the heating system at one of them. He said he won't have the budget to spend on local advertising that he usually buys.

In addition, he said, "we've had to cut back on a lot of part-time staff. We're still kind of slow, but we're gradually bringing people back."grants from the Federal Emergency Management Agency, businesses cannot. The only government financing option for smaller companies is SBA loans, which charge 4 percent annual interest. The agency can lend up to $2 million for 30 years; companies with access to other credit usually can borrow for no more than seven years.

Taking on a loan means an additional monthly expense, and many small businesses may not be able to afford it.

However, small business owners are an optimistic lot.

Sandy was a chance for Marc LaMaina, the owner of Greenport cupcakery Butta'Cakes, to take the business in a new direction. LaMaina said he sees the water damage as an opportunity to transform his shop into a tacqueria called Butta'Ritos.

LaMaina said he has applied for a $30,000 SBA loan to finance the makeover. For now, he is relying on savings to buy new equipment, signs and flooring to prepare for the grand opening of his new restaurant in mid-December.

"We actually took this as a sign," he said. "I think this happened for a reason."

With Keiko Morris

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