Monday, October 26, 2020
Oct. 26, 2020

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Oregon small businesses brace for brutal fall as federal coronavirus relief money runs out

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PORTLAND — Bruce Rice spends every night at CC Slaughters, the gay bar and nightclub he has owned for 17 years. Before March, he was accustomed to patrons packing the Old Town club to hear nightly live DJ sets.

But coronavirus restrictions forced the Portland establishment to shut down for three months and reopen with greatly reduced capacity. Six months into the pandemic, business remains down 80%.

Rice has kept the bar afloat thanks to the federal Paycheck Protection Program, which provided hundreds of billions of dollars in potentially forgivable loans to businesses across the country to help them retain employees and pay other expenses amid the pandemic.

But the money CC Slaughters secured through the program will be gone in just over a month. If Congress doesn’t approve a new round of relief funding by then, Rice said the nightclub might close for good.

“I really don’t know what the future is going to hold for us,” Rice said. “I see businesses all around me closing right now. If the government doesn’t come up with something else, then I really think a lot more are going to close. I might be one of those.”

The Paycheck Protection Program (PPP) was a key piece of the coronavirus relief legislation Congress approved in March. Despite early struggles, the program paid out $659 billion and increased the survivability of businesses by 14 to 30 percentage points, according to a working paper published by the National Bureau of Economic Research.

But the program lapsed in August and many businesses are now running out of the money they secured through the program, while others have already used it up. A separate federal relief program that paid unemployed Americans an extra $600 per week has lapsed as well. And now a successor $300 weekly benefits program has, too.

Talks in Congress to replace or extend those programs have stalled, leaving struggling businesses with little cushion as they head into what could be a difficult fall and putting employees who could face layoffs in a precarious situation.

While relief funding is drying up, the pandemic continues to severely impact businesses, said John Tapogna, president of consulting firm ECONorthwest. While consumer spending rebounded substantially in April and May after plummeting early in the pandemic, it rose by just 2% in July, according to the U.S. Department of Commerce.

Tapogna said businesses that have used up their PPP loans and are still struggling to come close to their pre-pandemic earnings, especially those in the leisure and hospitality industry, could face tough choices as they try to chart a path forward.

“Until we get a vaccine and this is fully eradicated and we can go back to our normal consumer behavior, I think we’re going to continue to see businesses struggle,” Tapogna said. “I don’t see that full recovery mode beginning any time sooner than the third quarter of next year.”

Craig Sweitzer, owner of commercial property brokerage Urban Works Real Estate, said he is already hearing from businesses planning not to renew or looking to break their leases. That’s especially true in downtown Portland, where protests and the vacant offices heap new challenges on top of the pandemic.

Sweitzer said there could be a sharp increase in business closures and vacancies without additional relief measures.

The next several months could be particularly difficult for Portland restaurants and bars, many of which managed to regain some business this summer by taking over sidewalks and expanding outdoor seating areas.

Matt Kaye, co-owner of Kayo’s Ramen Bar in North Portland, said the restaurant was able to keep most of its employees on staff and pivot to a delivery and takeout model after securing a PPP loan.

Still, the business was bleeding money until the summer, when it was able to start utilizing its patio and expand sidewalk seating to draw in customers who didn’t feel comfortable dining inside. While Kaye believes that the restaurant will survive the pandemic, he expects business may plummet again next month as the weather worsens and the restaurant goes back to relying on takeout and delivery.

“The winter is looking a little bit dicey for most restaurants,” Kaye said.

Dan Hart, the owner of four Portland bars, including Prost!, a German beer bar in North Portland, laid off staff early in the pandemic but was able to bring employees back with funding from PPP loans.

Hart said small businesses would benefit from another round of loans or some other targeted relief that would enable investments to weather the pandemic, such as building tented seating areas for the winter.

But if no additional relief comes, Hart said his bars may need to cut costs as they focus on survival this winter. That could mean another round of layoffs, although Hart is acutely aware that if he has to lay off employees again, they will not have access to the enhanced unemployment benefits they received earlier in the pandemic.

“We’re trying to maximize what we can do this summer and then minimize what we’re doing in the winter and just be as efficient as possible,” Hart said. “Unfortunately, that might touch staffing, but we’re hoping to do whatever we can to not have layoffs. We want to keep everybody on board.”

Joellen Piluso, the owner of the Horse Brass Pub in Southeast Portland, said she has been following talks in Congress closely, waiting to learn whether there could be another round of relief for small businesses.

The PPP loan that Horse Brass secured early in the pandemic was a lifeline for the bar. It enabled Piluso to reopen and bring back staff after a three-month closure and put the bar in a stable enough position to navigate a three-day shutdown when wildfire smoke poured into Portland earlier this month.

But moving forward, Piluso said there is still a lot of uncertainty for Horse Brass, which has been a Southeast Portland staple since 1976. Business remains down substantially, and it is unclear what the fall will hold. If there is a surge in coronavirus cases that forces the bar to shut down again, that could be disastrous.

“I’m still optimistic,” Piluso said. “I believe in the resilience of people and our community and I know we have the ability to make it through this. We just need patience and persistence, and a little help from those higher up in government.”

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