Collateral damage: Can small businesses survive this “double whammy”?

Lilly Ayers places a stick of sage in a bag while serving a customer at her store Queen Hippie Gypsy in downtown Oakland. All of the small businesses on Ayers’ block were damaged during California protests over the killing of George Floyd Minneapolis police.. Photo by Anne Wernikoff for CalMatters

Zahalea Show-Anderson spent last Sunday afternoon tidying up her dojo for its grand re-opening. After nearly 10 weeks in which a coronavirus-driven shutdown kept the lights off and the doors locked, the Urban School of Self Defense, a jiu-jitsu academy in downtown Long Beach, was ready to let its students back in.

A few hours later, Show-Anderson was home in front of the TV, watching the dojo go up in flames.

“We’ve been there 25 years and there are a lot of things that money cannot buy,” she said a few days later. “There were a lot of stories in there. It’s really just going to be a memory now.” 

In a week of peaceful protest against police violence, politically motivated vandalism and arson, and opportunistic theft, Show-Anderson’s academy, like many small businesses across the state, has become the collateral damage. 

The timing is, of course, horrible. 

First there was the pandemic. Then came the shutdowns. No more customers, no more revenue, but no freeze on monthly rent, lease payments or insurance premiums. And just as the shutdowns were starting to lift, this.

“‘Double-whammy’ doesn’t even begin to describe it,” said Rachel Michelin, president of the California Retailers Association. “We were finally seeing the light at the end of the tunnel.”

In Minnesota — where a white police officer’s killing of black man George Floyd triggered the last week of unrest — lawmakers have called for the use of state funds to reimburse businesses that have had their windows smashed, their walls graffitied or their inventories looted. 

So far that kind of targeted help is not forthcoming from Sacramento. Despite historic levels of unrest we’ve seen across the state, legislators are focusing on other crises: a pandemic, an economic collapse and a rapidly approaching deadline to pass a state budget despite an 11-digit shortfall.

While large retailers such as Target, Walmart and Gap have selectively shuttered stores around the country, vowing to continue to pay workers in the meantime, smaller operations like Show-Anderson’s have had to put their reopening plans on hold — if not cancel them all together. That leaves them hoping for some relief from their insurers, if they have them. If they don’t, they’ve turned to the kindness of strangers — those who helped sweep up glass and who have donated money online to rebuild.

State regulators and business groups say it’s still too early to assess how many California small businesses suffered property damage or suffered theft losses in the tumult of the last week, or to gauge the full extent of the financial harm. 

By historical standards, the damage may be widespread, but it might not be especially high.

During the Los Angeles riots of 1992, where 63 people died in and around Koreatown, the estimated financial cost to insured property has been put at $1.4 billion, after adjusting for inflation, according to Verisk Analytics.

What distinguishes this latest outburst of collective rage and opportunistic criminality is how far it has traveled up the income ladder. Vandalism and theft took place in the lower-income Fruitvale district of Oakland and Vallejo, but also tony, mostly white West Hollywood and Walnut Creek.

“We want to go to places of white affluence so that the pain and outrage that we feel can be put right in their faces,” Melina Abdullah, a Black Lives Matter organizer and a Cal State Los Angeles professor, told the Los Angeles Times.

Local news coverage indicated that some protest organizers made a deliberate effort to bring the unrest to wealthier, whiter neighborhoods and the businesses there — protesters said they wanted to ensure those communities couldn’t just escape into their own privilege.

But while the total cost to businesses has yet to be tallied, after months of pandemic and recession, many businesses were only barely hanging on. 

That includes businesses like Lilly Ayers’ in downtown Oakland. Ayers and her husband, Kyrah, are the owners of Queen Hippy Gypsy where she sells crystals, incense and essential oils. By late-May, the couple were late on rent. They had just thrown together a website to allow for curbside delivery and get a little cash coming in. Then last Friday, someone bashed in her front window. 

Ayers had hoped insurance would cover replacement, but was told that her general liability policy did not cover the window damage. 

Financial cost aside, as a black business owner and an Oakland native, having her business vandalized amid a nationwide protest in defense of black life has been emotionally draining. 

“I am a part of this too. I am hurt. George Floyd did not deserve to go,” she said. “Yes, black lives matter. But my black business matters too.”

Store manager Geneva Demmitt prepares for a crowd of customers by placing rainbow strips of tape six feet apart on the sidewalk in front of boarded up businesses along 14th street in downtown Oakland. All of the businesses on this were vandalized during recent protests earlier this week against police violence. Photo by Anne Wernikoff for CalMatters
Store manager Geneva Demmitt prepares for a crowd of customers by placing rainbow strips of tape six feet apart on the sidewalk in front of boarded-up businesses along 14th Street in downtown Oakland. All of the businesses on this street were vandalized during recent protests earlier this week against police violence. Photo by Anne Wernikoff for CalMatters

State insurance regulators say that, contrary to Ayers’ experience, most standard commercial insurance policies should cover the cost of vandalism and theft — even if they do not cover the cost of having to stay shuttered for weeks on end.

But after spending months with little to no business during the pandemic, some business groups worry that some small businesses may have allowed their policies to lapse — at the worst possible time.

Even after businesses across the state realized that many insurers were refusing to cover costs associated with a worldwide pandemic, Janet Ruiz, a spokesperson for the Insurance Information Institute, said she and her colleagues were urging businesses to keep their policies at all cost. “You could still have a fire, even if you’re closed and not there,” she said. “And there’s always the possibility of regular vandalism — though we didn’t foresee riots.”

Even for insured business owners, policies often come with large deductibles. Owners also are generally required to pay for repairs out of pocket before they get reimbursed, said Ari Takata-Vasquez, director of the Oakland Indie Alliance, a nonprofit that supports small restaurants, bars and shops around town.

The California Department of Insurance has no estimate, a spokesman there said, of the number of businesses in California who lack insurance or allowed their policies to lapse since the beginning of the recession. 

Oakland businesses are no stranger to vandalism and theft “even when there aren’t riots,” she said. “On a normal day it sucks, but you’re able to rebound. But we’re particularly concerned now for businesses that are small and local and often under-capitalized and can’t just can’t pony up the money.”

Small, under-capitalized businesses have struggled to get credit since the beginning of the public health crisis. 

So far the federal government has offered more than $700 billion low-cost loans to businesses. But advocates say the rules of the Paycheck Protection Program, the largest source of such cash, have made it particularly difficult for smaller businesses — particularly those owned by people of color — to access that cash. 

The program’s guidelines do not require lenders to channel the money to historically disadvantaged markets, and black and brown business owners are more likely to have no employees and to have prior felony convictions, excluding them from eligibility, according to an analysis by the Center for Responsible Lending

Connections also make a difference.

“A lot of banks were just serving their existing customers, so if you had that prior banking relationship you were already in line,” said Paulina Gonzalez-Brito, executive director of the California Reinvestment Coalition, which pushes for more equitable lending practices. “Immigrant-owned small businesses, black-owned small businesses — they were often not in line.” 

Show-Anderson, a black woman, stressed that her business has always been “part of the movement” to empower people of color through self-defense. To stay afloat during the statewide shelter-in-place order, she applied for a federal loan from the Small Business Administration in April. She said she has yet to hear back.

It’s unclear whether the state will cough up more money anytime soon.

Early in the pandemic, Gov. Gavin Newsom used his emergency powers to park $50 million in the state’s Infrastructure and Economic Development Bank, or I-Bank. Those funds are meant to backstop private loans to small businesses unable to access federal relief funds, paying back lenders up to 95% of loans if businesses don’t or can’t.

In May, the governor proposed another $50 million. With a June 15 deadline to pass a budget, that is still up for negotiations. 

Mark Herbert with the Small Business Majority, an industry group, is pushing for that extra support. 

“We have to have government-backed capital to survive the next six months,” he said. That’s particularly true for “businesses that are not likely accessing federal relief and not accessing traditional forms of credit.”

In the meantime, many cash-strapped businesses are turning elsewhere.

Oakland Indie Alliance has its own fund to help small businesses. As of Wednesday, said Takata-Vasquez, it had nearly $100,000. She said she was not surprised that no financial aid has been forthcoming from the city, county, or state. “We didn’t get support during the occupy movement either.”

The GoFundMe website is filled with campaigns for businesses that have been robbed or vandalized. Shayla Jamerson, who runs the event production company SoOakland, set up a campaign with the goal of raising $5,000 for black-owned businesses. Within three days she’d raised $120,000.

“That just shows how together we are as a community,” she said. “We understand there are those white supremacists. But there are a whole bunch of people who aren’t like that and it shows.”

On Thursday, Lilly Ayers’ crystal shop was the only operation open on the 300-block of 14th street in downtown Oakland. To the left, a boarded-up beauty salon. To the right, an electronic shop cleaned out over the weekend remained closed, a handwritten sign apologizing for the inconvenience. 

Ayers and her husband, Kyrah, had a bubble machine whirring next to their table topped with rose quartz, statutes, a bottle of hand sanitizer and a tip jar. A small crowd in facemasks gathered to shop or take in the rare good vibe.

Among them was Chris Aivaliotis, the white manager of the neighboring Kon-Tiki bar. Aivaliotis said he’s been doing a lot of thinking about the appropriative, mostly-invented tiki culture, the blood history of the rum trade, and his role as a white guy in the local business community.

It’s a community, Lilly Ayers said, that has been enormously supportive. “There’s no way anyone who is from our community would do this,” she said, pointing to the fractured glass window. 

Aivaliotis stepped forward and dropped a hundred dollar bill into the tip jar. 

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