Will Small Businesses Stay Closed Post-Pandemic? This article appeared at Catalyst on August 22, 2020

https://catalyst.independent.org/2020/08/22/covid-19-small-business-post-pandemic/

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Will Small Businesses Stay Closed Post-Pandemic?

Can the United States stand to lose the four million small businesses Oxxford predicts?

By Luka Ladan August 22, 2020 Economy & Jobs| Articles

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More than one million. That is how many small businesses have closed in the United States, due, in one way or another, to the COVID-19 pandemic.




According to New York-based Oxxford Information Technology, as many as 1.4 million small businesses closed their doors or temporarily suspended operations in the second quarter. By the end of the year, four million small businesses could be lost. This means job loss of epic proportions: In June, the number of people working at companies with fewer than 500 employees (e.g. the “small business” threshold) dropped by nearly 11 percent from its February peak.




Millions and millions of previously employed Americans are being affected, to say nothing of those who enter the job market every year, who they are now competing with.




Unfortunately, the short-term economic bleeding could be even worse than anticipated. Thousands of small businesses are closing their doors without reporting closure, which Bloomberg’s Madeleine Ngo describes as “silent failures.” In Ngo’s words: “This wave of silent failures goes uncounted in part because real-time data on small business is notoriously scarce, and because owners of small firms often have no debt, and thus no need for bankruptcy court.”




While the immediate economic picture is anything but rosy, the stubborn persistence of the coronavirus also raises longer-term questions. Namely, how will a “black swan” event like the COVID-19 pandemic impact entrepreneurship in the years and decades to come?




Entrepreneurship is already an uphill battle. One in five small businesses fails within the first year. By the end of their fifth year, roughly 50 percent have been wiped out. Within a decade, only about a third survive.




Then, there is generational difference. The Millennial generation was already more risk-averse than its predecessors, with many young professionals choosing a traditional work arrangement over the turbulence of business formation. Interestingly, Millennials do fancy themselves as entrepreneurial, with 60 percent of Millennials considering themselves entrepreneurs and 90 percent recognizing entrepreneurship as a mentality.




However, they are not walking the walk: In 2015, the share of people under age 30 who own private businesses reached a 24-year low, plummeting from 10.9 percent in 1989 to just 3.6 percent. More recently, Guidant Financial found that 12 percent of America’s small business owners are Millennials, although they comprise half of the U.S. workforce.




Of course, the Millennial generation’s risk-aversion is not one-dimensional. From student loan debt to an inability to gain market share, there are many explanations for slumping start-up rates, and some are certainly valid. At a time when “cash on hand” is more valuable than ever, entrepreneurship may simply be a bridge too far.




Which brings us back to the COVID-19 pandemic: Where does entrepreneurship go from here? More likely than not, an already risk-averse generation will take in a “black swan” event and decide to mitigate risk even further. The sudden vulnerability of America’s labor market will be reason enough, for Millennials and many other Americans, to opt for the “sure thing” of traditional employment, rather than the great unknown of entrepreneurship.




Look at it this way: In 2001, only 24 percent of Americans then aged 25-to-34 claimed that fear of failure was keeping them from starting a business. By 2014, 40 percent of the same demographic reported that fear—a 16 percent increase between generations. The COVID-19 pandemic is unlikely to diminish those anxieties, when business failure has become so mainstream.




None of these trends bode well for U.S. economy, one dependent on the growth potential of human innovation. There will always be exceptions to the rule (see: Mark Zuckerberg), but would a younger Mark Zuckerberg decide to become an entrepreneur in today’s business climate? Perhaps not.




One thing is clear: A large-scale shift away from entrepreneurship is sure to undermine America’s long-term gross domestic product, job creation, poverty, and other economic indicators. Without the entrepreneur, America’s once-extraordinary economic experiment begins looking like the rest.

Taxi Drivers Protest With No Coronavirus Relief In Sight Patch August 21, 2020

This story orginally appeared at https://patch.com/new-york/new-york-city/taxi-drivers-protest-no-coronavirus-relief-sight

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Taxi Drivers Protest With No Coronavirus Relief In Sight

Drivers shut down traffic around city hall to protest a lack of aid, and continued on to medallion creditors who still demand payment.

By Documented NY, News Partner

Aug 21, 2020 1:19 pm ET


Bronx, New York - May 6, 2018: Views of Jerome Street in the Bronx.

Bronx, New York - May 6, 2018: Views of Jerome Street in the Bronx. (Photo: Christopher Lee for Documented.)

August 21 2020

Max Siegelbaum @maxsiegelbaum


Taxi drivers parked their cabs and shut down the area around New York City Hall on Wednesday morning to demand help from the mayor. COVID-19 has dried up most of their fares, and creditors are still seeking money for their taxi medallions that have plummeted in value. The New York Taxi Workers Alliance organized the rally, which proceeded from city hall to buildings of taxi loan creditors in Long Island and New Jersey. The organization estimates ridership has dropped between 80 percent and 90 percent during the pandemic. "The brokers, the mayor the banks, they all said they would take care of yellow medallion taxis, but instead, the TLC [Taxi and Limousine Commission) didn't tell drivers the medallion was going to drop from hundreds of thousands of dollars to only $83,000 — leaving many of us with huge debt and it's killing us," one driver said outside City Hall. amNY

Hard times: One in four Americans have missed a bill payment since COVID-19 emerged

This article originally appeared on August 10, 2020 at https://www.studyfinds.org/quarter-americans-missed-bill-payment-covid-19/

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Tough for many these days, and a new survey shows that Americans are cutting costs or even adopting a ‘minimalistic’ lifestyle to make ends meet. 

NEW YORK — From our social lives to professional careers, life as we know it has shifted since the beginning of 2020. Well, almost everything; millions may have lost their jobs due to COVID-19, but that doesn’t mean the bills have stopped coming. Indeed, paying off bills are an unavoidable part of life, even during a pandemic. Unfortunately, a new survey of 2,000 Americans finds that one in four (24%) have already missed at least one payment since the pandemic began.


Among that group, 26% say they haven’t paid their cell phone or cable bills. Another 25% failed to pay for streaming services, and perhaps more worryingly, some of their electricity or utilities bills.

On average, Americans who admit to skipping a bill payment have missed five bills altogether.

Commissioned by EnergyBot, the survey set out to gauge just how much COVID-19 has dealt a blow to Americans financially. Predictably, money is a big concern these days. In fact, 63% say they’re “always” worried about paying all their bills right now. Similarly, 58% are battling extra stress over their bills since the pandemic started.

Ways we’re cutting back

With those last stats in mind, it makes sense then that 65% of respondents admit they’ve had to make some sacrifices lately to make ends meet. What type of sacrifices are we talking about? Many have cancelled subscription services (38%) and gym memberships (39%). Others are cutting costs by no longer ordering takeout food (35%).


All in all, 52% say they only buy the “essentials” these days. Another 43% are no longer buying premium quality goods (toilet paper, gas) in an effort to save some cash. Some are adopting new lifestyles: 41% say they’re following “minimalistic” approach to life.

Moreover, about two in five people never use their credit card anymore because it encourages them to spend more.


Raiding retirement to pay off bills

A third of Americans have also been forced to dip into their savings accounts because of COVID-19. On that note, 55% of respondents often feel “overwhelmed” by just how much the coronavirus has changed their financial footing.

Even small expenses, like repairing a broken home appliance, just aren’t possible right now. A significant portion of respondents (35%) have learned to live without a broken appliance because they just can’t afford to fix it. Meanwhile, 68% have tried to fix the appliance themselves (or asked a spouse to fix it). Others (33%) have used some of their savings to solve such issues when they were unable to fix the item themselves.

Another 37% say, however, that they wouldn’t even have enough savings to fix appliances if they were to break.

A few other common ways Americans are saving money through this pandemic are: turning off lights when they’re not needed (62%); turning off appliances when they’re not being used (46%); closing windows/doors when the heat is on (42%); opening the windows instead of using AC (36%); and using blinds to adjust room temperature (33%).

Taxi commission fails to regulate Uber and Lyft under two-year-old city law

This article orginally appeared in Cranes New York Business on August 13, 2020 at 
https://www.crainsnewyork.com/transportation/taxi-commission-fails-regulate-uber-and-lyft-under-two-year-old-city-law

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Taxi commission fails to regulate Uber and Lyft under two-year-old city law

BRIAN PASCUS


The city’s taxi enforcement agency known for its heavy hand with drivers has neglected to implement a two-year-old law aimed at helping yellow taxis compete with Uber and Lyft as the ride-hail apps roiled the industry.


Local Law 149, signed by Mayor Bill de Blasio and enacted Aug. 14, 2018, created the category of High Volume For Hire Services—companies that handle more than 10,000 rides a day—and required them to apply for a special permit through the Taxi and Limousine Commission. Under the regulation they must turn over records, including driver compensation, environmental impact, financial impact and other information, that could result in further restrictions on them.

So far, both Uber and Lyft have applied for the permits, but the TLC has not approved their applications.

“The TLC failed to timely enact regulations and enact the legislation which their chair asked for,” said Christopher Lynn, a TLC commissioner from 1996 to 1998. “In other words, the TLC did everything else except level the playing field and hold Uber accountable.”

The law sought to provide greater transparency of companies, such as Uber and Lyft, whose fleet of cars had risen exponentially in the city beginning in 2011 at the expense of traditional yellow taxi drivers and livery black car taxis, leading many of these drivers to fall into bankruptcy and despair. There were several taxi-industry suicides before the law’s passage.

For taxi medallion owners, the TLC’s lack of enforcement is nothing short of a betrayal of its mission to regulate and protect the yellow cab medallion industry.

“I expected the TLC to enforce the rules that they’ve had on the books for many years, which would’ve prevented many of the excessive for-hire vehicles from ever being on the road,” said Carolyn Protz, a taxi medallion owner. “The TLC hasn’t done anything. They haven’t held the app companies to the rules they were supposed to create.”

More than that, industry insiders say, the city could be leaving money uncollected during an extreme budget crisis. The penalty for companies operating without the High Volume For Hire Service license is a $10,000 fine each day the violation is in place.

The law explicitly states it is unlawful for these types of companies to operate unless licensed by the TLC.

But emails and legal documents obtained by Crain’s show that Uber and Lyft have been operating in New York without an approved high-volume license for two years.

During a July 23, 2019, public hearing before the TLC, Uber noted that the status of its high-volume license, which had been submitted to the TLC, was still pending. That September the TLC testified that it was in the process of implementing the law.

Not much changed nearly a year later.

An email exchange from June 18 of this year between Kala Wright, the TLC's deputy commissioner for policy, and Protz confirmed that Uber, Lyft and Via were still operating without an approved license as late as 20 months after the City Council passed the bill.

“Hi Carolyn, thanks for following up, the [high-volume] licenses are still under review, all of the company's (sic) have submitted their application materials,” Wright wrote at the time.

Lyft confirmed that it has not heard back from the TLC on its application.

"The TLC has yet to issue formal [high-volume] licenses or provide indication of when those should be expected," Lyft representative Campbell Matthews said.

Uber and Via did not respond to a request for comment.

For its part, the TLC has said that it’s done nothing wrong, but the agency failed to make clear why it has delayed subjecting the ride-hail apps to the law.

“Uber and Lyft are indeed fully licensed and will remain so while their HVFHV applications are being processed,” said Allan Fromberg, a spokesman for the TLC, using the designation for high volume for-hire vehicles.

Medallion owners, such as Protz, can’t understand how the TLC could turn a blind eye to the regulations established under a new law explicitly passed to level the playing field among all drivers and ride-share companies.

“The TLC is really rogue. They just ignored what they were told to do by the City Council,” she said.

Baked into Local Law 149 are a few different licensing requirements that Uber and Lyft must comply with to be licensed under the law. These requirements include a list of bases through which the companies will dispatch trips, a business plan with trip volumes, a vehicle count, accessibility requirements and an impact analysis.

The impact analysis assesses the effect of a prospective licensee’s operation on the environment and documents the applicant’s impact on traffic congestion, public transportation, private motor vehicles and noise in the city area.

It is thought that these regulations—notably a comprehensive account of the environmental impact tens of thousands of Uber and Lyft vehicles have on the city's environment—would complicate, if not prove detrimental, to the ride-share companies.

City Council Speaker Corey Johnson said agency representatives testified to the council in September 2019 that they were working on implementing the law.

“The council passed laws regulating for-hire vehicles with the expectation that the TLC would implement and enforce them as soon as possible, so it's frustrating to hear this is taking so long,” Johnson said. “I urge the TLC to take action quickly to fix this situation and comply with the law we passed.”

Bronx Councilman Ruben Diaz Sr., who introduced the bill, has called on Attorney General Letitia James to investigate what he said is lack of oversight by the TLC.

Councilman Ritchie J. Torres, who chairs the Oversights and Investigations Committee, said he was “deeply disturbed” by the allegations that the TLC is circumventing local law.

“No agency gets to pick and choose the laws it wishes to follow,” Torres spokesman Raymond Rodriguez said. “The TLC has an obligation to faithfully follow all local laws, and Local Law 149 is by no means an exception.”

For medallion owners, who have seen their livelihood altered in the face of the ride-share onslaught, the failure of the TLC and the de Blasio administration to implement Local Law 149 has dramatically altered the city’s transportation landscape.

“They damaged public transportation, increased pollution, increased congestion, destroyed a $15 billion taxi medallion franchise and created poverty among all the drivers,” Protz said. “And they’ve done all that for nothing.”

Retail Chains Abandon Manhattan: ‘It’s Unsustainable’ New York Times August 11, 2020

This article originally appeared in the New York Times at https://www.nytimes.com/2020/08/11/nyregion/nyc-economy-chain-stores.html
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Retail Chains Abandon Manhattan: ‘It’s Unsustainable’

Some national chains, both retail and restaurants, are closing outlets in New York City, which are struggling more than their branches elsewhere.




A Gap store near Rockefeller Center. Many companies have kept their stores closed in New York, even as they have opened stores in other parts of the country.

A Gap store near Rockefeller Center. Many companies have kept their stores closed in New York, even as they have opened stores in other parts of the country. Credit...Hiroko Masuike/The New York Times

By Matthew Haag and Patrick McGeehan

Aug. 11, 2020

For years, Bryant Park Grill & Cafe in Midtown Manhattan has been one of the country’s top-grossing restaurants, the star property in Ark Restaurants’ portfolio of 20 restaurants across the United States.

But what propelled it to the top has vanished.

The tourists are gone, the office towers surrounding it are largely empty and the restaurant’s 1,000-seat dining room is closed. Instead, dinner is cooked and served on its patio, and the scaled-down restaurant brings in about $12,000 a day — an 85 percent plunge in revenue, its chief executive said.


Five months into the pandemic, the drastic turn of events at businesses like Bryant Park Grill & Cafe that are part of national chains shows how the economic damage in New York has in many cases been far worse than elsewhere in the country.

In the heart of Manhattan, national chains including J.C. Penney, Kate Spade, Subway and Le Pain Quotidien have shuttered branches for good. Many other large brands, like Victoria’s Secret and the Gap, have kept their high-profile locations closed in Manhattan, while reopening in other states.

Michael Weinstein, the chief executive of Ark Restaurants, who owns Bryant Park Grill & Cafe and 19 other restaurants, said he will never open another restaurant in New York.

ImageA Uniqlo store on Fifth Avenue. Many businesses in Manhattan are struggling because of a lack of tourists and a relatively small number of office workers.

A Uniqlo store on Fifth Avenue. Many businesses in Manhattan are struggling because of a lack of tourists and a relatively small number of office workers. Credit...Hiroko Masuike/The New York Times

Of Ark Restaurants’ five Manhattan restaurants, only two have reopened, while its properties in Florida — where the virus is far worse — have expanded outdoor seating with tents and tables into their parking lots, serving almost as many guests as they had indoors.

“There’s no reason to do business in New York,” Mr. Weinstein said. “I can do the same volume in Florida in the same square feet as I would have in New York, with my expenses being much less. The idea was that branding and locations were important, but the expense of being in this city has overtaken the marketing group that says you have to be there.”


Even as the city has contained the virus and slowly reopens, there are ominous signs that some national brands are starting to abandon New York. The city is home to many flagship stores, chains and high-profile restaurants that tolerated astronomical rents and other costs because of New York’s global cachet and the reliable onslaught of tourists and commuters.

But New York today looks nothing like it did just a few months ago.

In Manhattan’s major retail corridors, from SoHo to Fifth Avenue to Madison Avenue, once packed sidewalks are now nearly empty. A fraction of the usual army of office workers goes into work every day, and many wealthy residents have left the city for second homes.


An H&M store on Fifth Avenue is open, but other stores along the famous thoroughfare are still shut.

An H&M store on Fifth Avenue is open, but other stores along the famous thoroughfare are still shut. Credit...Hiroko Masuike/The New York Times

Many stores are still closed, some permanently, while those that are open have very little foot traffic.

For four months, the Victoria’s Secret flagship store at Herald Square in Manhattan has been closed and not paying its $937,000 monthly rent. “It will be years before retail has even a chance of returning to New York City in its pre-Covid form,” the retailer’s parent company recently told its landlord in a legal document.


“In the prime real estate areas, all the stores rely on having half international tourists and half local tourists or those from the local neighborhoods,” said Thiago Hueb, a founder of a jewelry company who had decided to close his flagship store on Madison Avenue before the pandemic struck because of high rents.


Now brokers are calling him trying to lure him back to the block, but Mr. Hueb, whose jewelry is sold in 80 department stores nationwide, is not interested.

“The avenue is no longer what it used to be,” he said.

J.C. Penney and Neiman Marcus, the anchor tenants at two of the largest malls in Manhattan, recently filed for bankruptcy and announced that they would shutter those locations.




The Neiman Marcus at Hudson Yards, the first in New York City, had only opened last year, with its name adorning the outside of the luxury mall — the centerpiece of the country’s largest private development.







Image

Victoria’s Secret’s flagship store in Midtown Manhattan has remained closed for months, and its owners have stopped paying rent.

Victoria’s Secret’s flagship store in Midtown Manhattan has remained closed for months, and its owners have stopped paying rent. Credit...Hiroko Masuike/The New York Times

Some popular chains, like Shake Shack and Chipotle, report that their stores in New York were performing worse than others elsewhere, investment analysts said. A few dozen Subway locations have closed in New York City in recent months. Le Pain Quotidien has permanently closed several of its 27 stores in the city and plans to leave others closed until more people return to the streets, said Andrew Stern, co-chief executive of the chain’s parent, Aurify Brands.


A Gap Store near Rockefeller Center has stayed closed and has not paid its $264,000 monthly rent. Two T.G.I. Friday’s in prime locations, one near Rockefeller Center and another in Times Square, have remained closed while its restaurants elsewhere in the country have reopened.


Anyone in the food and dining business is really suffering right now,” said Vin McCann, a restaurant consultant with Heyer Performance in Lower Manhattan. “I think that’s true in all the boroughs.”


New York’s stringent lockdown and methodical reopening may have brought the virus to heel, Mr. McCann said, but it is also wreaking havoc on businesses with so few people going to work, virtually no visitors and many residents “a little loath to go out” and worried for their health.

“There’s going to be a lot of pain,’’ he added.


Landlords have started filing lawsuits against commercial tenants for not paying rent, accusing some national brands of trying to take advantage of the crisis.

A Zara store in Manhattan. J.C. Penney and Neiman Marcus, which anchor two of Manhattan’s largest malls, have declared bankruptcy and are closing their stores there.

A Zara store in Manhattan. J.C. Penney and Neiman Marcus, which anchor two of Manhattan’s largest malls, have declared bankruptcy and are closing their stores there. Credit...Hiroko Masuike/The New York Times

“SL Green and landlords across the city have worked with retailers large and small to protect jobs and New York’s tax base during this crisis,” said Stephen Meister, a lawyer representing SL Green, which leases the Herald Square store to Victoria’s Secret.

But, he added, “Victoria’s Secret is a multibillion-dollar, publicly traded conglomerate exploiting the situation in an attempt to avoid paying its contractual rent obligations.’’

The store’s parent company, L Brands, did not respond to a request for comment.

A spokeswoman for Related, the developer of Hudson Yards, said the company remained bullish on the future of retail in New York City despite the closing of Neiman Marcus and the economic downturn.

“Retail at Hudson Yards was off to a strong start before this crisis hit, and we firmly believe that fashion and retail will always remain core to the vibrancy of New York,” the spokeswoman, Kathleen Corless, said.

New York’s shutdown dealt an especially painful blow to chains like Shake Shack that were born in the city and thrived as urban oases, said Nicole Miller Regan, who follows food chains for Piper Sandler in Minneapolis.


“That’s always been their core strength from a home-field advantage,” Ms. Regan said.

Shake Shack reported on July 30 that it had experienced a 40 percent decline in revenue in the second quarter and that its stores in big cities like New York “were most impacted by the Covid-19 outbreak.”




They eventually reopened to serve takeout and deliveries, but they did not rebound as well as the company’s suburban locations that have drive-up windows where customers can avoid all but the briefest interaction, Ms. Regan said.




“The drive-through is the channel that consumers feel most comfortable with,” she said.




Like Shake Shack, Chipotle told investors that its stores in the Northeast, including New York, were underperforming the rest of the chain, said Nick Setyan, an analyst with Wedbush Securities in Los Angeles.




The main reason. Mr. Setyan said, is that “people just aren’t going to work” in much of Manhattan.




For Veggie Grill, a California-based chain of 35 restaurants, New York is “the most difficult market for us to operate in right now,” said Jay Gentile, the company’s chief operating officer.




After three years of planning, Veggie Grill, which serves plant-based sandwiches and salads, opened its first New York restaurant in the Flatiron district in December.




Now it’s struggling to keep the place open with a pared-down staff, and sales that have fallen about 80 percent from before the pandemic, Mr. Gentile said.




“In New York City, there is next to no lunch business,” he said. “No one’s coming in from Connecticut. No one’s coming in from New Jersey.”




And, there are no tourists wandering the streets, he added.




The story is different at some of the company’s restaurants on the West Coast, which are now doing as much business lately as they did a year ago, he said.




The shutdown and phased reopening of the city presented challenges that derailed Veggie Grill’s expansion plans.




Three months after opening, Mr. Gentile had to lay off all 70 of its New York employees, including a general manager who was supposed to oversee the addition of three locations in the city. In May, the company hired back about 24 of the workers with expectations that business would pick up as the city reopened.




Now, the staff is down to 16 employees, only two of whom work full-time.




“We have two hours at lunch and 2½ hours at dinner to make our money,” he said. “We’re still paying very high rent. It’s unsustainable.”




Despite all the hardships, Mr. Gentile said he’s determined to keep the doors open. “If we close New York down,’’ he said, “then we would have to close it for good.’’

U.S. bankruptcies on track for 10-year high with more than 100 consumer companies already filing

This article originally appeared at Marketwatch.com on August 11, 2020, at https://www.marketwatch.com/story/us-bankruptcies-on-track-for-10-year-high-with-more-than-100-consumer-companies-already-filing-2020-08-11

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U.S. bankruptcies are en route to a 10-year high with 424 companies filing as of August 9, according to S&P Global Market Intelligence. The group's analysis took into account both public and private companies with public debt. The coronavirus has hit consumer companies hard, with more than 100 filing for bankruptcy including Men's Wearhouse parent Tailored Brands Inc. TLRD, +4.57%, department store Lord & Taylor and work wear retailer Brooks Brothers. Nearly 100 bankruptcies are in the energy and industrials sector. Oil-and-gas producer Chesapeake Energy Corp. CHKAQ, +5.28% and small-engine maker Briggs & Stratton Corp. are among the 35 companies that have filed with more than $1 billion in liabilities.

Bankruptcy Subchapter V Updates

 

As many readers of our blog and emails, Congress passed a new bankruptcy law known as Subchapter V. Information about that law can be found at our blog shenwick.blogspot.com. https://shenwick.blogspot.com/2020/06/how-subchapter-v-could-save-your-small.html

New Subchapter V is similar to chapter 13 of the bankruptcy code but it can only be used by a business, not an individual.

Some creative uses of Subchapter V are  to discharge repayment of a PPP loan, to reject a commercial lease which a tenant no longer wants to occupy, or to reject unfavorable agreements.    

Subchapter V became effective on February 19, 2020 and several decisions have been announced by various bankruptcy courts which are favorable to Debtors. 

First, if a company filed bankruptcy under Chapter 11 can they convert their case to a case under Subchapter V? Yes. 

In re Progressive Solutions, Inc., No. 8:18-bk-14277-SC, 2020 WL 975464, at *5 (Bankr. C.D. Cal. February 21, 2020) (small business designated Chapter 11 debtor could retroactively proceed under Subchapter V after the case had been pending approximately 15 months).

-In re Glass Contractors, Inc., No. 20-40185 (Bankr. E.D. Tex. February 25, 2020) (small business designated Chapter 11 debtor could retroactively proceed under Subchapter V after the case had been pending approximately 1 month).

-In re Body Transit, Inc., 613 B.R. 400 (Bankr. E.D. Pa. March 24, 2020) (small business designated Chapter 11 debtor could retroactively proceed under Subchapter V when the case had been pending 48 days).

Second, can a debtor file under Subchapter V, if the debtor is not currently engaged in business? Yes, if a majority of its debt was business debt. 

-In re Wright, No. 20-01035-HB, 2020 WL 2193240, at *3 (Bankr. D.S.C. April 27, 2020) (debtor who was not currently engaged in business operations qualified as “small business debtor” where 56% of its debt amounted to residual business debt).

Third, does a Subchapter 5 Bankruptcy Trustee have the automatic right to retain counsel? No. 

-In re Penland Heating and Air Conditioning, Inc., No. 20-01795-5-DMW, 2020 WL 3124585, at *_ (Bankr. E.D.N.C. June 11, 2020) (Bankruptcy Petition #: 20-01795-5-DMW) (denying Subchapter V trustee’s application to retain counsel, which was filed as a matter of course, because the need for legal representation had not arisen). A Subchapter V trustee may not retain legal counsel automatically like a bankruptcy trustee can do in a Chapter 7 case.

Clients, accountants or lawyers who have questions regarding Subchapter V should contact Jim Shenwick at 212 541 6224  or jshenwick@gmail.com

One-Third of New York’s Small Businesses May Be Gone Forever New York Times August 3, 2002

This article originally appeared in the New York Times on August 3, 2020

https://www.nytimes.com/2020/08/03/nyregion/nyc-small-businesses-closing-coronavirus.html

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One-Third of New York’s Small Businesses May Be Gone Forever

Small-business owners said they have exhausted federal and local assistance and see no end in sight after months of sharp revenue drops. Now, many are closing their shops and restaurants for good.




William Garfield, the owner of Glady’s, a Caribbean restaurant in Brooklyn, said he decided to close after his landlord told him he would need to start paying his full monthly rent.
William Garfield, the owner of Glady’s, a Caribbean restaurant in Brooklyn, said he decided to close after his landlord told him he would need to start paying his full monthly rent.

In early March, Glady’s, a Caribbean restaurant in Brooklyn, was bringing in about $35,000 a week in revenue. The Bank Street Bookstore, a 50-year-old children’s shop in Manhattan, was preparing for busy spring and summer shopping seasons. And Busy Bodies, a play space for children in Brooklyn, had just wrapped up months of packed classes with long waiting lists.


Five months later, those once prosperous businesses have evaporated. Glady’s and Busy Bodies are closed for good and Bank Street, one of the city’s last children’s bookstores, will shut down permanently in August.


The three are victims of the economic destruction that threatens to derail New York City’s recovery from the financial collapse triggered by the coronavirus pandemic.


An expanding universe of distinctive small businesses — from coffee shops to dry cleaners to hardware stores — that give New York’s neighborhoods their unique personalities and are key to the city’s economy are starting to topple.


More than 2,800 businesses in New York City have permanently closed since March 1, according to data from Yelp, the business listing and review site, a higher number than in any other large American city.


About half the closings have been in Manhattan, where office buildings have been hollowed out, its wealthier residents have left for second homes and tourists have stayed away.


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When the pandemic eventually subsides, roughly one-third of the city’s 240,000 small businesses may never reopen, according to a report by the Partnership for New York City, an influential business group. So far, those businesses have shed 520,000 jobs.


While New York is home to more Fortune 500 headquarters than any city in the country, small businesses are the city’s backbone. They represent roughly 98 percent of the employers in the city and provide jobs to more than 3 million people, which is about half of its work force, according to the city.


When New York’s economic lockdown started in March the hope was that the closing of businesses would be temporary and many could weather the financial blow.


But the devastation to small businesses has become both widespread and permanent as the economy reopens at a slow pace. Emergency federal aid has failed to provide enough of a cushion, people remain leery of resuming normal lives and the threat of a second wave of the virus looms.


The first to fall were businesses, especially retail shops, that depended on New York City’s massive flow of commuters. And months into the crisis, established businesses that once seemed invincible, including some that had ambitious expansion plans, are cratering under a sustained collapse in consumer spending.


One business that will not reopen is Bank Street Bookstore, a nonprofit on the Upper West Side run by the Bank Street College of Education. More than 90 percent of its revenue was in-store sales, mostly to neighborhood parents, the college’s students and elementary schoolteachers.


“We had to keep reinventing the business every week to two weeks, based on new guidelines,” Caitlyn Morrissey, the store’s manager, said about the past months. “Our cornerstone was in-person sales, not web sales.”




Image“Our cornerstone was in-person sales, not web sales,” said Caitlyn Morrissey, the manager of Bank Street Bookstore, a children’s book shop that is closing for good.
“Our cornerstone was in-person sales, not web sales,” said Caitlyn Morrissey, the manager of Bank Street Bookstore, a children’s book shop that is closing for good. Credit...Amr Alfiky/The New York Times
Unlike larger firms, small businesses — bookstores, bodegas, bars, dental practices, gyms and day care centers — typically do not have the financial resources to overcome a few rough days or weeks, let alone months.


There is no clearinghouse for reliable data on the number of small businesses that have closed in New York or nationwide. The actual number of permanent closings in New York is probably higher than Yelp’s tally since it largely focuses on consumer-facing businesses. A small business is generally defined by economists as those with under 500 employees.


From March 1 to the end of April, during the height of the pandemic in New York City, businesses in the city that use the payment company Square saw their revenues drop by half, according to an analysis the company provided to The New York Times. The most significant revenue declines were in the Bronx and Manhattan, the company said.


As part of a $2.2 trillion emergency aid package adopted in March, the federal government set aside about $500 billion in small-business loans to keep workers employed and companies afloat. But business owners said they have spent all or most of their loans, paying salaries and bills, including rent.


More help for small businesses is part of negotiations as the Trump administration and Republicans and Democrats in Congress try to iron out another rescue package.


While the worst of the pandemic in the United States struck New York City first, small businesses across the country have been clobbered.


Between early March and early May, roughly 110,000 small businesses nationwide shut down, according to researchers at Harvard.


In New York, the restaurant and hospitality industry has been one of the hardest hit. More than 80 percent of the city’s restaurants and bars did not pay full rent in June, according to the NYC Hospitality Alliance.


Among those restaurants was Glady’s in Brooklyn. Its revenue plummeted by two-thirds since March, to about $12,000 per week in June. The majority of its sales were from tropical rum drinks served through a side window of the restaurant.


The owner, William Garfield, said he decided to close in June before officials started allowing outdoor dining after his landlord said he had to start paying the full monthly rent, $8,000, starting in July. Mr. Garfield said the healthy revenue from drink sales was still not enough to make ends meet.


“We were thriving,” said Mr. Garfield, 32, said about Glady’s business before March. “I would disagree with the sentiment that if someone had a thriving business they should be able to survive this.”


Mr. Garfield has another restaurant, Mo’s Original, and a bar next door, both of which he plans to keep open. His staff among his businesses has shrunk from 56 to seven.


He has spent almost all of his small-business stimulus loan, known as Payroll Protection Assistance, about $72,000. His insurance company denied his business interruption claim, citing New York State’s order that restaurants were “essential businesses” and could stay open.


“It’s the most frustrating situation because it’s not about passion anymore or the work you put in or the hours you put in,” he said. “It’s all about the mitigating circumstances that are out of your control.”


In recent weeks, “For Lease” signs have started to appear on storefronts on streets throughout New York, evidence that businesses that tried to ride out the initial months or abruptly shift to new online business models could no longer survive.


Business owners said they are at a tipping point. They have exhausted their federal, state and local aid. And while some landlords have offered breaks on rent, some business owners say others have been less flexible.


Owners say they also have to cope with constant uncertainty — not just the threat of a resurgence of the virus but also having navigate shifting reopening plans.


Restaurants in New York City were expecting to restart indoor dining in July. Owners bought food and supplies for what they thought would be larger crowds. But days before the restrictions were to be lifted, officials halted the plans, citing rising cases in other states that had allowed indoor dining.


Nearly a third of the 2,800 businesses in New York City that have permanently closed were restaurants, according to Yelp.


The remaining businesses represent a broad swath of the city’s economy, including small law firms, beauty stores, spas and cleaning companies.


“As a small-business owner, I’m surprised that more businesses have not closed yet,” said Andrea Dillon, the owner of Busy Bodies, a day care she opened on Fulton Avenue in Brooklyn in 2016.


Ms. Dillon said she noticed the ripple effect of the pandemic in late February, a few weeks before the city shut down. Parents and caregivers were canceling upcoming birthday parties and classes.


By early March, she realized that her entire business model — in which up to 70 children and adults cram into a play space with toys and live music — could not coexist with the coronavirus.


She asked her landlord for a break on her $6,000 a month rent, but he refused. Ms. Dillon said she decided in early April to close down.


“The face of New York City storefronts, they will not be forever changed,” she said. “But they will be changed for the foreseeable future.”


While her management company did not offer a break on rent, another landlord, Brian Steinwurtzel, said he was doing just that for some of his roughly 2,000 tenants in New York City, many of them small businesses. Mr. Steinwurtzel, the co-chief executive at GFP Real Estate, said he helped them apply for federal assistance and lowered their rents while business is down.


“It doesn’t make any sense to kick them out or fight with them as long as we are all working together,” Mr. Steinwurtzel said. “We believe we are all in it together, and we all have to help each other out.”


The most vulnerable small businesses in New York City might be those operated by minority or female owners. Recent studies have shown that these were largely shut out of federal aid. There are about 10,500 business that New York City has certified as minority- or female-owned.


A survey of such businesses released by the New York City Comptroller’s Office found that 30 percent of them believed they were likely to fold within the next 30 days.


Among those businesses is ThroughMyKitchen, a catering and snack company owned by Evelyn Echevarria. Before March, she derived most of her income from selling goods at street fairs and catering. Her last event was in March, catering a 120-person wedding in South Carolina.


She is surviving on unemployment benefits, but the largest portion of that, the federal stimulus of $600 per week, expired at the end of July. She also received $2,000 in assistance from the city.


“It’s been very, very hard,” Ms. Echevarria, 58, said. “The small businesses won’t be able to survive this. This, to me and many others, is devastating. It’s devastating.”


Sheelagh McNeill contributed research.