Houston's small businesses struggle to reopen after Harvey

While larger box stores have the resources to rebuild, family owned businesses face a loss of customers, infrastructure, and funds as they work to get back on their feet. 

First Look

In 2008, hurricane Ike tore the roof off his business, Three Brothers Bakery. Now, he estimates, he's facing $1 million in damage and lost revenue from Harvey – the fifth time a storm has put his bakery out of commission.

He's always recovered before. But this time, he wears the weary countenance of a man nearly broken.

"This is the last time for me," he says. "It's emotionally draining. I just can't do it anymore."

More than a week after Harvey poured more than 4 feet of rain on Houston, killing at least 65 people, destroying thousands of cars and leaving hundreds of thousands of families with flood-damaged homes, America's fourth-biggest city is striving to reopen for business.

Houston's airports and shipping lanes reopened to limited traffic last week. Some workers returned to their offices Thursday or Friday. More followed on Tuesday after a long Labor Day weekend of cleanup and regrouping.

With waters receded, some parts of the sprawling metropolitan area look virtually untouched. Yet in other places – the leafy bedroom community of Kingwood or the Meyerland neighborhood – piles of debris sit above curbs, industrial-size dumpsters dot shopping-center parking lots and the air is thick with the odor of mold and decay.

"I'm encouraging people to get up and let's get going," Mayor Sylvester Turner said over the weekend. "Most of the city is dry. And I'm saying to people, if you can open, let's open up and let's get started."

Many big businesses will likely recover relatively quickly. But small companies will struggle to replace moldy carpets and damaged equipment, to reconnect with suppliers, to meet payroll and to draw back customers, many of whom are nursing financial injuries of their own – swamped cars, flooded basements, leaky roofs.

Some companies are still too overwhelmed to resume business, which means their employees remain idle and unpaid.

"The big boxes and big chains can absorb hits like this; small businesses can't," says Craig Fugate, who served as administrator of the Federal Emergency Management Agency in the Obama administration. "Some will make the decision not to reopen. Others won't be able to."

FEMA estimates that nearly 40 percent of small businesses never reopen after a disaster.

On Wednesday, Mr. Jucker hopes to reopen the bakery, which his father and two uncles founded 68 years ago.

Over the weekend, the place was a wreck. Jucker tossed a ruined loaf of bread into a dumpster and pointed to a jug of blue food dye that will have to go, too. Also ruined is an icemaker, upended by flood waters. Bees swarmed garbage bags full of rotting confectionary and baking ingredients. Cream puffs and Danishes wilted on racks in the parking lot.

The bakery lost the live yeast used for sourdough bread; Jucker will have to grow more. It had been roasting its own coffee but lost $15,000 worth of beans. A remodeled cafe at the front of the bakery was mostly destroyed. One of the bakery's four industrial ovens has to be replaced at a cost of more than $50,000. A second one needs at least a new motor, if not a full replacement.

Payroll pressure

Across town, Michael Kaufman is counting his own losses. Flood waters drenched his 29-year-old business, Wholesale Cleaners, ruining the carpet, warping the counters and wrecking the computer inside his $40,000 Unipress machine. The damage comes to about $10,000.

From his son's home, where he had taken refuge, he watched the nightmare unfold on the shop's digital cameras. First, the yellow lines in the parking lot disappeared in the rain. Then the water seeped inside.

The cleaners, situated in the Jewish community of Meyerland, had always enjoyed good fortune. In the past when storms hit Houston, they flooded the opposite bank of Brays Bayou. This time, water went everywhere.

"It was a lake here," Mr. Kaufman says.

Next, Kaufman faced an odd problem: Flood victims started dropping off mounds of wet shirts and slacks, some so sodden they needed to be cleaned twice. One longtime customer brought four racks of clothes.

But what sounds like a windfall isn't. Kaufman knows it may be weeks before those customers – many of them distracted and financially squeezed by home repairs – will return to pick up their clothes and pay for the cleaning. Some might never return.

Kaufman worries that some of his clients will give up on Houston and its hurricanes and move away. That's what happened in New Orleans after Hurricane Katrina brutalized that city in 2005.

In the meantime, Kaufman faces a cash crunch. And he has to meet payroll Friday.

"I'm worried about the business," he says.

Kaufman's anxiety led him to seek information about a loan from the US Small Business Administration, which has sent teams to Houston to provide emergency credit to businesses and homeowners. The SBA finances the replacement of damaged property and equipment and offers working capital loans to help businesses through the disaster. The interest rate on SBA business loans is just over 3.3 percent, only about half the rate on comparable loans from private-sector lenders.

As of early Tuesday, the SBA had approved 19 low-interest Harvey-related business loans worth $1.7 million.

"We have to get people to apply," says Michael Flores, a spokesman for the SBA disaster loan program. Often, he says, "they are just overwhelmed."

Blue-collar boom

In the short term, some Houston businesses may actually benefit in the aftermath of Harvey. Thousands of Houstonians need new cars to replace those submerged in floodwater. More need to replace carpet, drywall, roofs – even entire homes.

"Anybody's who's got any type of construction or cleanup business – they're going to go off the charts," says Mr. Fugate, the former FEMA administrator. "That's going to skyrocket."

Peyton Williams, a project manager for a Houston contractor, says he's hiring laborers as fast as he can, offering $150 a day through Facebook advertisements. On Saturday, he hired 50 laborers to do demolition work at a damaged apartment complex.

"For blue-collar construction, we're already working," Mr. Williams says, taking a break from work inside a damaged factory on Houston's north side. "Everybody wants to get back to work as fast as they can."

The businesses that reopen the fastest stand to gain an advantage. In hard-hit Kingwood, the Jason's Deli outlet reopened Thursday after a thorough cleanup. Unlike nearby competitors, the deli was spared any flood damage. For now, says Mark Livingston, a managing partner, there aren't many other options for residents who want or need to eat out.

Sheetrock and smartphones

The owners of Chic Tailors, near Brays Bayou in Meyerland, didn't wait for help. When Maria Tran and her family couldn't find a contractor, they went to work themselves, measuring and cutting Sheetrock to replace a soggy section of wall. Never mind that Ms. Tran is nine months pregnant. Even her 3-year-old son, Ander, chipped in, taking out the trash and keeping watch over the others.

Tran wants to reopen the shop quickly so her sister can take over while she gives birth to her second child. She worries because she watched customers move away after previous floods. But she says that "compared with other people, we're lucky we're still here and alive."

Smartphones and the internet allowed professional firms to keep going after disaster struck. When Harvey closed the Houston offices of the Jackson Walker law firm, top managers stayed in touch with twice-a-day phone calls.

One lawyer checked into a downtown hotel after Harvey forced him from his home and visited the empty office to inspect the computer equipment. He displayed the hardware to the firm's technology staff in Dallas via smartphone video, allowing them to diagnose problems.

For some companies, the full scope of the hardship inflicted by Harvey won't be clear anytime soon. Will a flood-damaged strip mall come back? Or will it succumb to the damage it endured, imperiling the stores and restaurants that rent space there?

"The weeding-out process takes about two years," Fugate says. Bankruptcies typically rise in the aftermath of natural disasters as companies and households buckle under financial stress.

How long will take for Houston to return to business as usual?

"I don't even want to guess," says Roberta Skebo, deputy director of the University of Houston's Small Business Development Center, which counsels businesses. "This is going to be a long process."

This story was reported by The Associated Press.