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Will California's small businesses survive another COVID-19 surge without more help?

By Margot Roosevelt, Los Angeles Times on

Published in Business News

For 27 years, along an industrial strip by the 405 Freeway, Go Kart World has offered family fun with six racetracks and an arcade. But as news of the coronavirus spread in February, customers fled. And in March, health officials shut down the business.

"I was freaking out," said Cynde Harris, co-owner of the Carson, Calif., business with her husband, John. "Our season runs February through September. We were losing like $1.4 million a month. There's no way to recover from that."

The Harrises furloughed 35 workers, and over the next few months, they managed to snag two federal loans totaling $270,000. In October, a $30,000 grant from Los Angeles County came through. Go Kart World reopened this month.

But Harris is worried. "You can only take on so much debt," she said. "It's bitter medicine to be told, 'You can borrow the money,' when a government closure just drove a truck through your business."

When the coronavirus began its death march through the economy last spring, Congress' $2.2-trillion CARES Act buoyed California's small businesses like Go Kart World with billions of dollars in loans and grants. But rescue efforts are now faltering as the pandemic reaches catastrophic new heights.

After months of partisan wrangling and the presidential election of Joe Biden, Congress remains in a stalemate over new stimulus funding for struggling entrepreneurs, unemployed workers and strapped state and local governments.

 

Without an influx of new federal aid, tens of thousands of California's 5 million small enterprises face a bleak winter of government restrictions, dwindling customers and closures amid a slowing economic recovery. Many may not survive.

"The loans they got gave many businesses some moments of respite," said John Kabateck, California director of the National Federation of Independent Business. "But they were Band-Aids on a very big wound. Now they're very, very terrified."

Despite a partial rebound over the summer, California's small business revenue was down by 29.3% this month, compared with January, according to Opportunity Insights, an economic indicators tracker based at Harvard University. The number of the state's small businesses that remain open has dropped by 28.8%.

With the possibility of a prolonged economic downturn, "many of these closures may be permanent because of the inability of owners to pay ongoing expenses," said UC Santa Cruz economist Robert Fairlie, who tracks data for the National Bureau of Economic Research.

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