Layoffs. Red tape. Anxiety. Small businesses fight to survive pandemic.

Gleim the Jeweler isn’t about to throw in the towel because of the coronavirus. The Palo Alto jewelry store was born amid hard times.

“It opened on April Fool’s Day 1931, in the middle of the Depression,” said Georgie Gleim, the company president, whose grandfather Frederick founded the store.

Now the business is in its 89th year, and Gleim is determined it will survive whatever comes, even if she and company Vice President Bhuvan Sahney have to run the business’ two stores — Gleim the Jeweler at Stanford Shopping Center and Bizzotto Boutique by Gleim the Jeweler at 540 University Ave. — all by themselves.

They are a long way from that point, however. The company still has 17 employees who are being paid and whose health insurance costs are 100% covered. The workers got their full wages during the first two weeks of the stay-at-home order and slightly reduced pay during the second two weeks so that everyone could stay on without hardship. After May 3, the company will reassess what it can do.

Gleim and Sahney are taking the biggest cuts.

“Georgie and I are not taking salaries,” Sahney said, noting that the welfare of their employees comes first.

Small businesses throughout the Midpeninsula are facing painful decisions as they seek to weather the increasingly perilous and complex economic climate. Some prominent businesses and restaurants — including Dan Gordon’s in Palo Alto and Lee’s Comics and Clarke’s Charcoal Broiler in Mountain View — have already folded. Others are bracing for imminent closure. Almost all are seeing mounting financial losses.

To gauge the impact of the economic shutdown, the Palo Alto Chamber of Commerce this week sent out a survey to local businesses, said Judy Kleinberg, president of the Palo Alto Chamber of Commerce. Of the roughly 50 responses it received by Thursday morning, 58% said they would definitely reopen after the shutdown, while 11% said they will open but not at the same level of service. Another 12% said there is a “significant likelihood” they will not reopen based on financial projections, Kleinberg said. (The remaining 18% were undecided.)

The survey also underscored the staggering costs of the shutdown. About 24% of the responders said they are losing more than $200,000 every month, while 22% said they are losing between $50,000 and $200,000.

Even those businesses deemed “essential” are reporting heavy losses, Kleinberg said. One reported that current sales “are not enough to protect our business.”

“Everyone is trying to pivot and get creative to survive,” Kleinberg said. “Some will be able to pivot and get creative but others will not.”

Palo Alto City Councilman Greg Tanaka said he has reached out to various businesses just to see if they’ll be coming back after the shutdown. His daughter’s favorite boba tea store, he said, is among those that have indicated they’re done for good.

“There’s a lot of people like that who are getting wiped out — totally wiped out financially, personally, from this catastrophe,” Tanaka said during the council’s April 13 meeting.

Some small businesses are burning through their savings to stay afloat, with hope that the economic shutdown will end soon. A March 30 survey by the National Federation of Independent Businesses, a group that advocates for small businesses, indicated that about half of small employers said they can survive for no more than two months, while one-third believe they can maintain operations for between three to six months.

“The outbreak has left few, if any, owners unscathed,” the report states.

To get through the economic crisis, business owners have had to lay off staff, shift operations from the brick-and-mortar world to a virtual one and navigate a complex, glitchy and rapidly evolving bureaucracy of grants, loans and tax breaks. Those businesses not deemed “essential” are bracing for months of revenue losses.

Michael Dorricott, owner of the Alma Street gym Training Space in downtown Palo Alto, had to cease operations in mid-March and lay off all 10 staff members. Like many other businesses, his gym is banking on virtual offerings and wondering when the shutdown will end.

“We’ve got a slow leak essentially, and I don’t know how long that is going to last,” he said.

The pandemic hit at a time when the gym was making “record-breaking industry revenue,” Dorricott said, to the tune of $120,000 per month. He noted, however, that the gym also has some of the highest costs for a gym of its size, with monthly rent of more than $30,000 as well as labor expenses. He said he has been fortunate that his landlord has allowed him to pay only one-third of his usual rent since the shutdown started.

Staffing is now down to four trainers who are only getting paid for the hours that they’re doing online sessions, he said. Training Space also made a decision last week to start offering online classes to the community for free, though it is accepting donations from those who can make a contribution.

“We want to support the community because we know a lot of people have lost their jobs,” Dorricott said.

Anna Chow, owner of Menlo Park’s Cheeky Monkey Toys, also has had to be nimble to remain in business during the pandemic. When all nonessential businesses were ordered to close in March, Cheeky Monkey Toys quickly pivoted to a direct delivery-only service, dropping off toys within a 10-mile radius of the store.

Under San Mateo County’s sheltering order, an essential business includes “businesses that ship or deliver groceries, food, goods or services directly to residences,” a definition that allowed Chow to continue to sell toys.

Right now, she said, the store gets a daily average of 20 to 25 orders and is able to make most deliveries within a business day.

The pandemic has evidently changed many habits, including the types of toys people play with. She has been trying to keep up with recent demands of puzzles, games, children’s learning tools and sidewalk chalk.

While Chow now limits hours for remote orders to 10 a.m. to 2 p.m., Monday through Saturday, she hasn’t laid off any of her nine full-time and six part-time employees, some of whom are in the store fulfilling orders while others are working at home. Nor did she reduce any of their health benefits.

“One thing about being a small business is your employees are your family — a lot of them have been with us five to 10 years,” Chow, 50, said. “I feel like, as an employer, I have an obligation for them.”

But that commitment can’t last. Looking at her bank account, Chow predicts she has two weeks before she’ll have to reduce pay — or worse, lay off any employees and shut down the business.

She saved some money from rent; her landlord reduced it by a third for April and May. But she’ll have to pay it all back come Sept. 30.

Vying for federal funds, waiting for answers

As the pandemic stretches on, many small businesses are hoping to benefit from some of the government programs that were launched to deal with the unprecedented economic stall out.

The most ambitious of these is the Payment Protection Program, which was included in the $2.2-trillion package that the U.S. Congress passed on March 27. The $359-billion federal program provides businesses loans of up to $10 million, provided that at least 75% of these loan benefits are devoted to payroll.

The program also includes provisions for loan forgiveness if the business quickly rehires employees and maintains salary levels.

Small businesses were also told they can tap into the Economic Injury Disaster Loan program, which was created to quickly distribute loans of $10,000 to businesses. The program also allowed some businesses to take out low-interest loans of up to $2 million.

Neither program, however, has rolled out as planned. The National Federation of Independent Businesses reported that about half of small businesses it had surveyed applied for the disaster-relief program. Just 4% had been approved and 1% were not approved. No one had received any money as of April 9, according to the association.

“Most applicants of the (Economic Injury Disaster Loan) have yet to receive an update on the statuses of their application, and no small businesses have received the loan or the emergency grant,” the federation reported.

But even with many applicants still waiting for responses to their Payment Protection Program applications, the federal government announced Thursday that it had officially hit its $349-billion limit for the program.

“SBA (Small Business Administration) is unable to accept new applications at this time for the Paycheck Protection Program or the Economic Injury Disaster Loan (EIDL)-COVID-19 related assistance program,” the Small Business Administration announced on its website.

The agency still plans to process applications that had already been submitted for the disaster-loan program on a first-come, first-served basis, according to the SBA.

Despite general recognition by lawmakers from both parties that the program needs more funding, Congress has not reached an agreement over the next package.

The glitches and limitations in the federal programs have stymied many would-be applicants. When Gleim applied for the Paycheck Protection Program, every bank the business reached out to said it was either not accepting applications or it had reached capacity. Some banks are only working with their established customers. Gleim has instead applied through online banks, Sahney said.

“It’s like throwing your name in a hat. You hope to hear back. You don’t get a confirmation,” he said.

He doesn’t waste his time on frustration with the red tape, however.

“We keep going, marching forward. If we’re the 10,000th person in line, our turn will come. It’s all about the long game,” he said.

On Thursday, he took a more somber view, likening the depletion of the federal money this week to the light at the end of the tunnel going out.

Dorricott also said he applied for disaster loans with the Small Business Administration and for the Paycheck Protection Program. Like thousands of other business owners, he had not received any indication as of Wednesday that a loan is heading his way.

“We’re not counting on it,” Dorricott said.

Chow applied for the Small Business Administration’s disaster loan assistance the first week it was available. She hasn’t heard back about it at all, and reaching someone at the agency seems unlikely.

“There were 2,594 callers ahead of me,” Chow said. “I stayed on the line for about an hour, and I moved up 50 spots.”

For the Payment Protection Program, she was instructed by her bank, Wells Fargo, to get in a queue to submit an application.

“The first day that became available, we got in the queue,” she said. “And about every day or two, we get an email from Wells Fargo saying we’re still in the queue, and we can’t submit an application yet.”

Their experiences appear to be widely shared. Kleinberg said that, of the 37 businesses that responded to the Chamber’s survey question about government assistance, not a single one had received any federal dollars.

With no government support in sight, Chow is seriously considering dipping into her children’s college fund just to be able to pay her employees.

“It’s what keeps me up at night,” she said. “It’s a devastating choice.”

Help large and small — but is it enough?

Given the magnitude of the economic crisis, state and local governments are also stepping in to assist small businesses. Earlier this month, Gov. Gavin Newsom announced a $50-million microloan program that will be administered through the Infrastructure and Economic Development Bank.

County supervisors and city councils along the Midpeninsula also have taken action to support small businesses, including banning evictions of both commercial and residential tenants during the emergency. Mountain View went a step further in late March by providing $400,000 in city funds to provide direct relief for small businesses, money that was matched by a $400,000 contribution from Google.

Palo Alto also is exploring ways to help local businesses, though it’s not yet clear what form the assistance would take. The City Council directed staff earlier this month to convene a roundtable of business owners and to explore a relief program that may include forgiveness of utility bills. Several council members, including Liz Kniss and Alison Cormack, expressed reservations about providing direct loans to businesses, a program that Kniss argued would be difficult for the city to administer.

Private companies and foundations also are trying to help. Georgie Gleim is one of many business owners vying to obtain loans and grants from programs such as Facebook’s $100 million Small Business Grants Program, $40 million of which will be distributed in the United States.

The Silicon Valley Community Foundation has partnered with the nonprofit microlender, Opportunity Fund, to provide loan payment relief and grants. The program, known as the Small Business Relief Fund, specifically targets self-employed individuals and small businesses, according to the foundation’s website.

The Los Altos Community Foundation has partnered with Mountain View on an effort known as #TogetherMV, a fund devoted to raising money that would be distributed to small businesses and residents in financial distress because of the pandemic.

Palo Alto council members also are talking about launching a program that would allow the community to directly assist small businesses. Vice Mayor Tom DuBois said at the April 6 council meeting that he believes local companies and residents will do their part to help small businesses survive.

“We have tremendous resources in Palo Alto — a lot of people willing to volunteer. I do think people will step up if we put together the right kind of proposal here,” DuBois said.

Putting stock in their businesses and customers

The pandemic recession may have blunted Gleim’s business but it hasn’t curbed her or Sahney’s optimism. On its Facebook page, where a chrysanthemum ring recently shared space with a whimsical Easter display of yellow marshmallow Peeps wearing turquoise earrings, the business is giving tips on how to keep jewelry looking good despite constant hand-washing, sanitizer and lotion.

And like other businesses, Gleim the Jeweler is planning for the post-pandemic future. Right now, the business could take advantage of a moratorium on insurance, Sahney said, but he and Gleim are paying as much as they can so they won’t face a huge bill when they reopen. They also don’t want to be part of a chain reaction causing other business failures.

“We’re not hoarding cash. We feel it’s very important to keep our part of the economy going,” he said.

Sahney said there are two schools of thought about what will happen when the economy reopens. One is that businesses will thrive because of pent-up demand; the second is that people will still be reluctant to shop out of fear or lost income.

Sahney believes the reality will fall somewhere in between. In preparing a plan for reopening, he and Gleim are weighing whether to have limited hours or a full schedule and ways to phase in the business.

Perhaps surprisingly, Sahney said that jewelry isn’t a high-profit business given the competition from online sellers. Gleim is hoping that people will remember the relationships they’ve had with her business and staff when it comes time to reopen. The stores allow people to come in and examine a diamond, to touch and feel and try on a ring or a bracelet. They provide human interaction that customers want, she said.

Fortunately, the jewelry business has another advantage for weathering the shutdown that some other stores don’t, Sahney said.

“Unlike food, our inventory doesn’t go bad. We can refashion things; there’s no shelf life to it,” he said.

Dorricott also believes his gym will withstand the current challenges and rebound after the pandemic.

“Absolutely!” he was quick to respond when asked about surviving the economic shutdown.

He acknowledged, however, that things may be different for a while.

“I’m not sure we’re going to hire back staff at all until we are fully profitable again,” Dorricott said.

Neither he nor anyone else really knows when that will be. But he does predict that the virtual gym that he is creating now, where members interact with trainers and free classes are offered, will likely remain in place even when the physical one reopens.

While the initiative is brand new, early feedback has been encouraging. The business has received $1,100 in donations in the first week, and Dorricott said he has a goal to hit revenues of $20,000 through online offerings.

“We’re going to continue to try to make that better and better,” he said.

For Chow, the shift to deliveries is just the latest turn on a journey that began in 2002, when she and her husband, Dexter Chow, purchased Cheeky Monkey Toys because they both thought owning a toy store would be fun. Back then, it was a 900-square-foot shop with three employees. Today, the toy store occupies a 4,000 square-foot building at 640 Santa Cruz Ave. in Menlo Park and has 15 employees.

Even though the times are tough, people have been “absolutely amazing,” Chow said. Recently, Menlo Park Councilwoman Catherine Carlton helped organize a toy drive in which people can purchase toys through Cheeky Monkey Toys and donate them to the Ronald McDonald House Charities.

Customers, Chow said, have been reaching out to support the store however they can.

While her new delivery model allows Cheeky Monkey to remain in operation, it also serves as a constant reminder to Chow of what she misses the most.

“It is so bizarre to be in there without people and kids,” Chow said of the store. “The sounds of kids’ laughter and even the sound of kids crying when they leave — I really miss it. It doesn’t feel alive right now.”

• If you’re a local small business owner who’s willing to share how you’ve been affected by the pandemic, we want to hear from you. Tell us your story over an email to editor@paweekly.com.

Find comprehensive coverage on the Midpeninsula’s response to the new coronavirus by Palo Alto Online, the Mountain View Voice and the Almanac here.

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