October 31, 2020

Coronavirus Surge Is Killing America’s Small Businesses

On the last Friday of June, after Gov. Greg Abbott of Texas said that bars across the state would have to shut down a second time because coronavirus cases were skyrocketing, Mick Larkin decided he had had enough.

No matter that Mr. Larkin, an owner of a karaoke club in Wichita Falls, Texas, had just paid $1,000 for perishable goods and protective equipment in anticipation of the weekend rush. No matter that the frozen margarita machine was full, that 175 plastic syringes with booze-infused Jell-O were in place, or that there were masks for staff members and hand sanitizer for guests.

That day, June 26, Mr. Larkin and his partner dumped what they had just bought into the trash and decided to close their club, Krank It Karaoke, for good.

“We did everything we were supposed to do,” Mr. Larkin said. “When he shut us down again, and after I put out all that money to meet their rules, I just said ‘I can’t keep doing this.’”

It was harrowing enough for small businesses — the bars, dental care practices, small law firms, day care centers and other storefronts that dot the streets and corners of every American town and city — to have to shut down after state officials imposed lockdowns in March to contain the pandemic.

But the resurgence of the virus, especially in states such as Texas, Florida and California that had begun to reopen, has introduced a far darker reality for many small businesses: Their temporary closures might become permanent.

Nearly 66,000 businesses have folded since March 1, according to data from Yelp, which provides a platform for local businesses to advertise their services and has been tracking announcements of closings posted on its site. From June 15 to June 29, the most recent period for which data is available, businesses were closing permanently at a higher rate than in the previous three months, Yelp found. During the same period, permanent closures increased by 3 percent overall, accounting for roughly 14 percent of total closures since March.

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Researchers at Harvard believe the rates of business closures are likely to be even higher. They estimated that nearly 110,000 small businesses across the country had decided to shut down permanently between early March and early May, based on data collected in weekly surveys by Alignable, a social media network for small business owners.

Christopher Stanton, an associate professor at Harvard Business School who was one of the researchers, said it was difficult to accurately gauge how many small businesses were closing because, once they shut their doors for good, the owners were hard to reach. He added that it could take at up to a year before government officials knew the true toll the pandemic was taking on small businesses.

At the moment, 39 states continue to record growing numbers of new cases daily.

It is not clear how many of the businesses Yelp is tracking count as “small” — defined by the Small Business Administration as those with 500 or fewer employees. But the company found that, among the tracked businesses — which include restaurants, retailers and other independent, consumer-facing operations — retail businesses, led by beauty supply stores, have been closing at the highest rate since the pandemic began. Restaurants are the next hardest-hit group.

ImageNick Muscari decided to permanently close Nick’s Sports Grill and Lounge in Lubbock after Texas’s second round of virus closures.
Credit…Dylan Cole for The New York Times

Small businesses account for 44 percent of all U.S. economic activity, according to the S.B.A., and closures on such an immense scale could devastate the country’s economic growth. Collectively, such businesses are one of the largest employers in the country, said Satyam Khanna, a resident fellow at the Institute for Corporate Governance and Finance at New York University School of Law who has written about the effects of the pandemic on small businesses.

So when small businesses close en masse, an entire sector of the economy suffers, Mr. Khanna said. There is lower cash flow, higher debt and more unemployment. “That leads to a big drag on the eventual recovery,” he said. “Because they are such an important source of jobs, losing them the way we are losing them now is going to make things far worse than they otherwise need to be.”

Because small businesses depend heavily on foot traffic and operate on thin margins, they are especially vulnerable to the ripple effects of a widespread shutdown.

For nearly two decades, Rich Tokheim and his wife sold sports memorabilia — hats, T-shirts, coffee mugs and other trinkets — to fans in Omaha at their store, The Dugout. Since 2011, The Dugout has occupied prime real estate across the street from the city’s 24,000-seat baseball stadium, which usually hosts the College World Series each spring.

The 2020 World Series was canceled in March. In the weeks that came after, other sporting events were scrapped — starting with college sports and extending to professional leagues that have struggled to relaunch their activities.

Mr. Tokheim, 58, watched his business fall off with growing unease, but it was only after a friendly chat with a retired college athletic director in May that the gravity of his situation hit home. He was already worried about the state of the virus in Nebraska, and whether there was enough tracking. Then the athletic director predicted that if college football was really canceled for the year, it would be the end of Division I sports as a whole.

“That really put me in overdrive,” Mr. Tokheim said. He negotiated an early exit on his store lease and announced a clearance sale at the store. The Dugout closed for good on June 30.

The government’s Paycheck Protection Program, rolled out in April and administered by the S.B.A., earmarked $660 billion of aid for small businesses, but stipulated that a loan would be forgiven only if most of it was used to pay employee wages for eight weeks. The rules were later relaxed, but in a sign of how many small business owners did not feel confident that they would be on steady ground by the time repayment was due, roughly $130 billion of aid money remained untapped when the program ended in June.

Even for those who took a P.P.P. loan, survival is no guarantee. Nick Muscari, a 38-year-old restaurateur in Lubbock, Texas, availed of one of these loans. His restaurant, Nick’s Sports Grill and Lounge, had been the culmination of Mr. Muscari’s life’s work — his years of toil as a waiter, pizza cook and manager at restaurants and bars beginning in his teenage years. Three years ago, he bought out the two partners who helped him start the restaurant in 2010. He considered it a crowning achievement, but to do so, he had to borrow money. He still owes a bank $80,000.

Credit…Dylan Cole for The New York Times
Credit…Dylan Cole for The New York Times
Credit…Dylan Cole for The New York Times

Mr. Muscari tried to ride out the spring lockdown that temporarily shuttered his restaurant with the help of the P.P.P. money. But when the state’s second closure order took effect on June 26, he decided to close for good.

“It had been in the back of our minds, just like, you know, if this happens again, can we make it?” Mr. Muscari said. “We were following all the rules and people were spread out. We never had anybody catch the virus in our establishment.”

Mr. Muscari, with the business closed and its 30 employees jobless, has nothing left but his house and his car. He also expects his landlord to try to sue him for the eight years’ worth of rent he is contracted to pay on his defunct restaurant’s space.


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  • Frequently Asked Questions

    Updated July 7, 2020

    • What are the symptoms of coronavirus?

      Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

    • Is it harder to exercise while wearing a mask?

      A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.

    • I’ve heard about a treatment called dexamethasone. Does it work?

      The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.

    • What is pandemic paid leave?

      The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.

    • Does asymptomatic transmission of Covid-19 happen?

      So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.

    • What’s the risk of catching coronavirus from a surface?

      Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

    • How does blood type influence coronavirus?

      A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.

    • How can I protect myself while flying?

      If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.


Many small businesses are also finding it onerous keep up with constantly changing local guidelines, while others

are deciding that no matter what their local officials say, it just is not safe to keep going. Gabriel Gordon, the owner of a tiny but popular barbecue restaurant in Seal Beach, Calif., decided to close permanently after studying the restaurant’s layout. He had determined that the kitchen would never be safe for multiple staff members to occupy at once while the virus was still active in the area.

“It’s essentially two hallways that are 11 feet wide,” Mr. Gordon said, describing the shape of the restaurant, Beachwood BBQ. “There are food trucks that are larger than my kitchen.”

Whatever the specific reasons may be for each closure, Justin Norman, Yelp’s vice president of data science, said that the federal government should offer small businesses more help. Mr. Norman said Yelp was concerned about the effects of small business closures, especially those owned by people of color, on society. Yelp, however, also has a financial interest in maintaining a robust small business environment, because it relies heavily on advertising by businesses on its platform.

“The time is right now to inject more capital or we may lose them forever,” Mr. Norman said. “It’s going to make our economies worse, it’s going to make our communities worse.”