California lets more businesses open, but for some it's too late

By Sharon Bernstein

SACRAMENTO, Calif. (Reuters) - The day California finally allowed hair salons to reopen after months of pandemic restrictions should have been a happy one for the sisters who own Hourglass Salon + Boutique in Sacramento. Instead, they spent it hauling out boxes and figuring out how to tell customers they were closing.

“Our hearts are shattered,” Erin Banville and Melissa Burgoon wrote to clients.

The popular business faced thousands of dollars in rent payments, and the state’s order allowing hair salons to serve customers indoors came days too late.

Nationwide, half of small businesses said sales were down by 25% or more in August from pre-pandemic levels, according to a survey of 20,000 companies by the National Federation of Independent Business (NFIB).

Twenty-one percent said they would not be able to stay afloat for more than six months, and another 19% said they would not make it if current conditions lasted for another year. Five percent said they would not be able to make it another two months.

Hardest hit are retail, travel, hospitality, and business and personal services companies, said Holly Wade, the NFIB's director of research. The problems go beyond states' temporary closure orders or business restrictions. Consumers have changed their habits, ordering retail goods and food online, working from home and fearing to patronize many businesses in person out of health concerns, she said.

With so many people working from home, small businesses that cleaned office buildings have had little or no work for months, Wade said, while restaurants have had to downsize and retool to offer food to go.

"It's been an incredibly challenging situation for many of our small businesses," said Marni Sanders, chief executive of the Yuba Sutter Chamber of Commerce, which serves an area north of Sacramento. "They were not equipped for something like this. They didn't have reserves, they were essentially living from paycheck to paycheck."

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Jeff Rossman, who owns two restaurants in San Diego, was breaking even earlier in the pandemic after retooling to handle mostly orders to go, requiring fewer employees, and participating in a state program to feed seniors. But reopening for indoor dining with restrictions on capacity would still be too expensive.

"It's going to be touch and go for a while, and I think you're going to see a lot of restaurants closing," Rossman said.

Denise Duncan, the owner of AT Industrial Products, which makes equipment to clean up combustible dust from metals used in manufacturing, said orders have dropped by half due to the double-whammy of a cyclical turndown and plummeting demand as the pandemic impacts clients' production and needs.

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"I might have 90 days before I gotta figure out how to shut it down and move on," she said.

Like other small business owners, Duncan is hoping Congress expands the Paycheck Protection Program, which helped many small businesses keep up with payroll expenses during the pandemic's early days.

To be sure, some sectors of the economy are booming. Construction and home improvement companies are busy upgrading homes and gardens as people focus on their live-work spaces and low interest rates spur home sales.

A Reuters analysis showed that demand is up for grocery items as people work from home and cook more. But demand for products and services used by office-workers is down, from business clothing to takeout coffee.

Christopher Thornberg, director of the Center for Economic Forecasting at the University of California, Riverside, said the pandemic and accompanying business and social restrictions accelerated changes already pressuring some businesses, particularly brick-and-mortar stores.

But many businesses will ultimately recover, he said. Women still want to get their hair done, so the salon industry will come back.

Such optimism offered little solace to Banville and Burgoon as they shut down Hourglass, packing hair products into boxes and pulling out the jewelry, blouses and that Burgoon sold from a boutique tucked into the salon's waiting room.

A day after California said it would allow salons to reopen for indoor services, Banville started seeing clients in a room she rented in a group working space. Burgoon was looking for a job she could do as a mom with two young children.

"We were thriving," Banville said of the salon, where stylists were often booked months in advance. "This is a decision that was made for us."

(Reporting by Sharon Bernstein; editing by Bill Tarrant and Leslie Adler)

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