Small business owners struggling: With sales shriveled, push is on for grants New Orleans Times-Picayune April 16, 2006 By Jaquetta White

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1 Small business owners struggling: With sales shriveled, push is on for grants New Orleans Times-Picayune April 16, 2006 By Jaquetta White The door to Violet's, a French Quarter clothing boutique, is open. It's been open since mid-october, when Marianne Lewis scrapped an outdated summer collection and restocked. Lewis persuaded all six of her former employees to return to the city with the promise of continued health benefits. Reopening the boutique was her way of showing the world that New Orleans was back in business after Hurricane Katrina. The trouble is, customers remain ominously scarce. Although open storefronts are hailed as signs of recovery and normalcy, small-business owners such as Lewis say reopening was only half the battle. Staying open is proving to be just as challenging. At Imperial Furniture on St. Claude Avenue, a business in no way dependent on the tourism that keeps the French Quarter flush: same story. Sales are off 90 percent. Even on Magazine Street, the city's paradise for shopaholics, Objets Trouvés, a high-end home furnishings store, is barely covering operating costs. And so it goes all across the repopulated parts of the city. Seven months after Hurricane Katrina, business is still sluggish for the many small firms that don't sell refrigerators, essential clothing, and other in-demand goods and services. Slowly, owners say, the resolve that pushed them to restart their businesses is giving way to a growing awareness that before the year is out many will close their doors again -- this time permanently. What's more, many feel that their needs are being ignored by local and state officials. Specifically, they say, the form of aid most readily available to them -- loans -- doesn't address their need. "So many people struggled to get their businesses open," said Lewis, who with her mother also owns the clothing boutiques Violet's II and Jackie's. "How sad is it going to be when those businesses have to close?" Sad, and also perilous for a city attempting to recover from disaster. "Our economy in New Orleans is driven by small business," Don Hutchinson, the city's director of economic development, said last month. On his first tour of New Orleans following Hurricane Katrina, U.S. Commerce Secretary Carlos Gutierrez also acknowledged the importance of small firms here. "The big challenge is to make sure we support the small businesses that support the people that come back," Gutierrez said. "What's at the heart of New Orleans is small businesses."

2 But Lewis' stores are ringing up just 35 percent of their pre-katrina sales, and she has contemplated closing. "Thirty-five percent does not pay our bills," she said. Slowly dying About 81,000 businesses in 10 Louisiana parishes were affected by Hurricanes Katrina and Rita. Some 29,000 of them remain closed, according to the latest figures from the Louisiana Department of Economic Development. And Lisa Friedlander, owner of Objets Trouvés, said there's not much to sustain the businesses that are operating. "Small businesses are dying," said Friedlander, whose wares run to pricey artwork and decorative fixtures. "They are dying now." Friedlander considers herself "one of the lucky ones." Objets Trouvés, French for "Found Objects," survived the hurricane season physically unscathed. What's more, it's on heavily trafficked Magazine Street. Still, Friedlander has worked the past six months without taking home a paycheck because current revenue barely covers basic expenses such as employee wages. "I can't go a year," Friedlander said. "I'm certainly not making money." For Lewis, to have landed a French Quarter retail space on Chartres Street, just yards from Jackson Square, was a business coup. "Who's going to come to New Orleans and not go to Café Du Monde?" Lewis said. But even a prime French Quarter location doesn't do it these days. There are few people walking in the store and even fewer walking out with bags. Recovery has been beyond slow, she said. When Violet's opened in October, Lewis thought she'd be hiring extra staff by now. "But I'm actually worrying I have too many people," she said. To pay bills, Lewis has placed orders and paid expenses using her credit cards. That can go on only so long. At the end of summer, she'll re-evaluate whether she can afford to remain in business. "We love the city, so we're staying for now," Lewis said. "But we need to see that things are moving in the right direction for us to want to stay here long-term." Louis Sahuc also plans to take a long look at his business after summer. Sahuc's photography gallery, Photo Works, is bringing in 30 percent to 40 percent of its pre-

3 Katrina sales. Business is so slow that the shop now is open only five days a week, instead of seven. "If I can get through summer, I'm all right," Sahuc said. Summer is a notoriously slow time for New Orleans retailers, since the hot and humid weather discourages conventioneers and leisure travelers. "I'm not looking forward to -- and no one should be looking forward to -- what (summer) might bring. It's not going to be pretty." Bridge loans The plight of small businesses has not gone unnoticed. Various local, state and federal programs have been created to help businesses recover. Locally, the mayor's Bring New Orleans Back Commission has recommended that $2.6 billion in federal money be spent to shore up and redevelop small businesses. The plan calls for a small-business incubator and venture capital fund as well as tax incentives. Additionally, millions of dollars have been set aside for loans by the state. Gov. Kathleen Blanco's office has promised $100 million in so-called bridge loan financing to help small businesses get back on their feet. Of that, $30 million was made immediately available. It was snapped up in just three weeks. The $50,000 bridge loan Shirin Harrell received has allowed her to keep current on rent payments at her law firm's downtown office and avoid layoffs. Without the loan, Harrell & Nowak would have been hampered in its attempts to go after new business, she said. The state created the bridge loan program for the express purpose of saving small businesses, said Matt Stuller, chairman of the economic development and work force training committees for the Louisiana Recovery Authority, which suggests to the governor, among other things, how federal dollars should be spent. "Small businesses are really a vital resource for bringing back the economy," Stuller said. But Friedlander and others say the bridge loans aren't enough. Imperial Furniture's co-owner Harold Carriles speaks wistfully about "trying to make business come back." Before the storm, his company sold furniture and gave credit to some of the city's poorest residents. With his customers gone and $800,000 in debt uncollected, Carriles said the company has been stalled in all of its attempts to get a loan. "We haven't made money for seven months now," he said. Business is a little better at Brothers Signature Fashions, a hip-hop clothing store on North Broad Street. Owner Ahmad Darwish said most of his customers are workers from

4 out of town. He's unsure what to expect when they leave, especially if residents haven't returned. But whatever happens, he's resigned himself to going it alone. "If you're going to wait for people to help you, you'll be in trouble," Darwish said. 'Loaned-out' Friedlander said small businesses such as hers, Brothers Signature Fashions and Imperial are suffering because there is a gross lack of what she called "true disaster relief" -- not loans, but outright grants. "People are loaned-out," said Friedlander, who serves as chairwoman of Second Wind, an advocacy group formed after the storm, in part, to lobby for more grant funding for small businesses. "We've taken personal loans. We don't have the consumer base to pay them back. The population is gone, and we don't have tourism. Loans, at this point, are not going to help. Our No. 1 focus is on getting grants." About 500 small-business owners from the metro area belong to Second Wind, formed by New York lawyer Kevin Curnin, who continues to provide pro bono legal council for the organization.. The group meets regularly and has given presentations on the need for grants to the Louisiana Recovery Authority and the City Council. "Leaving grants out is mind-boggling," said Curnin, an attorney with Stroock, Stroock & Lavan, who co-founded a similar organization to help small businesses in New York after the Sept. 11, 2001, terrorist attacks. "Your business is down 80 percent. You already have commercial debt. Do you want a bridge loan? Do you want more debt? No, these momand-pop shops do not want bridge loans. They want grants." After Sept. 11, the state of New York set aside more than $500 million in federal money for grants to aid small firms affected by the attacks on New York. Grant amounts were based on the number of employees and a business's proximity to the World Trade Center buildings. The endowments were $1,750 to $2,500 per employee, depending on location. The program aided businesses with as many as 500 employees, but was capped at $300,000 per operation. "They got it. They understood it," Curnin said. "We had Wall Street. We had big business. But even in lower Manhattan we didn't lose sight of the small-business community." 'A gross oversight' To be sure, the metro area's plight is quite different from New York's. One of the major impediments to recovery is the housing shortage. Tens of thousands of homes were lost to the storm, and Gov. Kathleen Blanco's plan for federal financing understandably puts the bulk of the $6.2 billion in Community Development Block Grants the state is receiving toward housing.

5 But Curnin said that should not preclude small-business grants. "We're telling tens of thousands of people to come home and here's your new house," Curnin said. "But what happens tomorrow? Where are you going to buy your clothes? Where are you going to work? It's a gross oversight, and it's going to hurt everyone." Second Wind is pushing for two types of grant programs similar to those implemented in New York. One is a business recovery grant program that would give affected businesses a percentage of their annual gross revenue. The second would be to attract or retain businesses. In New York, such grants paid a portion of the salary of every employee on staff for businesses that returned to or were started in the affected area. "I don't know how you're not doing that in New Orleans," Curnin said. Lewis said a grant of $20,000 to $25,000 would help keep Violet's afloat. With it she would pay employees and utility bills, and buy merchandise for her store. The money would carry her through the summer and into the fall season, when she expects business to pick up as conventioneers return. "If the city is not back then, I don't expect them to help us indefinitely. I just need to get through summer," Lewis said. "I can probably sustain myself through fall." 'Not off the table' There has been only one million-dollar grant program in the region for small businesses since the storm. That one was operated by the Louisiana Association for Business and Industry, which collected money through private donations. The money has been doled out by now, but demand hasn't lessened, said Brigitte Nieland, vice president of the association. About 170 firms got a share of the $1.3 million, though more than 5,000 applied, Nieland said. "As word continues to get around, people keep calling," Nieland said. "I would say from our personal experience that demand is overwhelming." Stuller said the LRA is considering a grant program but added that it is difficult to put in place. The state would have to be careful that it is giving money to businesses that actually are viable and not those that just need an allowance, Stuller said. "When you're just giving dollars out and not expecting a repayment on that, it could very easily come to abuse or dollars not being given out to the right people," Stuller said. Still, he said, a grants program for small businesses is "not off the table." The LRA could reach a decision on whether to create such a program within 30 days, he said. The state is

6 not obligated to follow the LRA's suggestions. Small businesses, already in the seventh month of their fiscal doldrums, say those decisions aren't coming soon enough. "We're seven months out," Friedlander said. "People can't go any longer." And if their businesses close, Lewis mused, then what? "Let's say I leave because I didn't get any assistance and the next time you walk down Jackson Square, there is a Banana Republic, a Gap and an Ann Taylor," she said. "It would look like any other city in America."

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