Small Business Riot Damage Relief: What To Expect & How Your Small Business Might Be Able To Get Assistance
Over the past week, countless individuals across the US have protested police brutality following the death of George Floyd while in custody of the Minneapolis Police Department. These protests, though sparked by the recent tragedy, have roots stemming from decades of civil inequality. Even though many of those demonstrating their First Amendment rights have engaged in peaceful protests, some individuals have reacted violently towards both public and private property.
It is far too soon to calculate the full brunt of the damage caused by violent riots, although initial reports indicate the destruction to be quite extensive. In Minneapolis alone — the heart of the now-national protests — several hundred businesses have been vandalized, looted, or otherwise harmed by fire, broken glass, or water.
Elsewhere, in cities such as Chicago and Los Angeles, business owners have had to plead and negotiate with those looking to damage and loot stores. No matter the exact extent, the total blow to businesses throughout the country is certainly astronomical.
In response to the rioting, some major retailers have backed the protests while downplaying the destruction to their stores. For instance, the department store giant Nordstrom stated in a press release that it can “fix the damage to [its] stores” while adding that “windows and merchandise can be replaced.” A few smaller businesses, such as a Bangladeshi-Indian restaurant in Minneapolis that lost its building to a riot-related, have also voiced support for the sometimes aggressive demonstrating.
This damage caused by rioting isn’t unprecedented — past riots in Los Angeles, Detroit, and Miami also caused heavy destruction. In those instances, governments and private organizations stepped up to aid local businesses. Unfortunately, such aid may not always be enough to heal local economic devastation — and especially so for those whose entire livelihood was tied up in businesses destroyed by a riot’s wake.
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The History: How Violent Unrest Affects Local Businesses
The United States has had a long and complicated history with public protesting. The Boston Tea Party of 1773 was an organized and targeted protest that opposed the tyrannical reign Britain had over its New World colonies. The women’s suffrage movement picketed, paraded, and participated in other forms of demonstration in the early 20th century, encouraging the acceptance of a woman’s right to vote. Throughout the mid-20th century, civil rights protests helped break down racist laws.
It is not uncommon for violent rioting to accompany protesting, even if most participants are engaging peacefully. And while protesting has been shown as an effective agent of social change, violent forms of protest can inflict substantial economic wounds on local communities.
The 1967 riots in Detroit cost between $40 and $45 million (just over $300 million in today’s money) while the 1992 Los Angeles riots caused as much as $1 billion in damages. Riots born outside of civil unrest can be also pricey — the rioting that ensued after hockey’s Vancouver Canucks won the 2011 Stanley Cup damaged roughly 4 million Canadian dollars worth of property throughout downtown Vancouver.
On top of the immediate impact, it can take years for communities to recover. Five years after the 1992 riots, Los Angeles had an unemployment rate that was about 3 percentage points higher than the national average, based on a 1997 New York Times report. By 2002, the city had lost nearly $4 billion in taxable sales in the decade following the riots, according to a 2004 study published in the Urban Studies journal.
More recently, Ferguson, Mo. — home to rioting in 2014 — continued to have never-returned-to-businesses boarded up as late as 2019. The small city’s unemployment rate also sat at 5.5% in June 2019, which was over 2% higher than the Missouri state average.
Aid might also fail to reach the places that need it the most. For instance, an estimated $40 million in property was damaged during the Los Angeles-area Watts riots of 1965. However, the Small Business Administration only doled out 26 loans worth $400,000 to businesses impacted by those riots.
In the aftermath of the Detroit and Newark, N.J., riots that took place two years later, the SBA was a bit more generous, giving out $3.4 million in aid to affected businesses. Some small business owners still felt slighted, though. Edward Deeb, while representing a Detroit grocers association, argued in a 1968 Senate hearing that “the small businessman feels it unfair that only one side is being told, and that side is based on sensational charges designed to arouse and inflame a community.” Deeb further claimed that businesses in areas hit by rioting were discriminated against — insurance companies deemed these areas “high-risk” and so had increased insurance premiums for business owners.
Following the 1992 Los Angeles riots, some Korean-American business owners struggled with the English-language application forms for the SBA-issued disaster loans. Meanwhile, other owners felt “the system was designed to discourage them,” as a Los Angeles-based advertising executive told the Associated Press. All told, four months after the Los Angeles riots, only 1,400 merchants out of the roughly 10,000 businesses damaged or destroyed had received loan checks; thousands hadn’t gotten anything or simply didn’t complete the application process.
In some cases, other factors doom damaged businesses. According to the Cincinnati Enquirer, 32 of the 70 businesses that received city-made emergency loans defaulted on their loans five years after the 2001 Cincinnati riots. Business owners in the southwestern Ohio city told the paper that “aftershocks of the riots” and increased violent crime and panhandling made people feel unsafe or unwilling to go downtown — ultimately harming many of the local businesses impacted by the rioting.
There are still seeds of hope, however. Some businesses, such as a clothing boutique in Ferguson, are able to survive and thrive after receiving aid money. Additionally, it’s important to remember that the very real and justifiable anger of rioters can help further positive societal change. Those incited by Martin Luther King Jr.’s assassination hastened passage of the 1968 Fair Housing Act.
The Aid: Where Businesses Can Look For Riot Relief
The question of who pays for damage following riots is often a tricky one. Business owners generally have several avenues to pursue: insurance, government aid, and/or private support through loans or donations. Success in these avenues can vary wildly from business to business, however.
Insurance coverage for riot-related damage, in particular, will depend on the business. In some cases where landlords don’t require inventory or equipment insurance, policies may cover very little and business owners may be on the hook for losses and repairs. If you have property insurance, however, you should receive coverage for rioting and civil unrest.
As for government aid, the SBA operates a disaster loan program. In the past, disaster loans have been issued for businesses impacted by rioting, such as those damaged during the 2015 Baltimore riots.
To qualify for a disaster loan, your business will need to be located somewhere the SBA has declared a disaster area. To monitor currently declared disasters, visit the SBA website. At the time of writing, the SBA has yet to declare any disasters relating to the nationwide riots, but that may change as the situation progresses.
In some cases, the federal government has provided other support channels. For example, after the 1992 Los Angeles riots, the government issued a $600 million relief package that was made available for residents, landlords, and business owners through the Federal Home Loan Bank Board system.
Beyond federal assistance, local governments and banks have also been known to step in. The state of California handed out emergency bridge loans following the 1992 riots, while city and county governments proposed emergency loans to businesses after the Cincinnati’s 2001 riots. A special loan program for businesses hurt by those 2001 riots was also made available by a local bank and chamber of commerce.
Other local organizations can also provide aid to hurt businesses — the Ferguson clothing boutique mentioned above received $20,000 from Phi Beta Sigma, a local fraternity. More recently, the Lake Street Council, a Minneapolis-based small business advocate, has raised nearly $4 million in aid money for local businesses ravaged in the recent riots. With similar organizations also chipping in, it may behoove businesses suffering from riot-based damages to seek out non-government funded sources.
Some businesses have also found success using donation platforms like GoFundMe. Examples here include a Minneapolis bar that has already raised over $1 million after its building burned down during the recent riots. Meanwhile, a Vietnamese restaurant in Tampa, Fla., just met its $80,000 donation goal after its location had been ravaged by rioting.
The Wrench: COVID-19
Purely in economic terms, the riots come at a hard time for many small businesses. Scores of businesses have been affected by the economic turmoil churned out by the COVID-19 pandemic. According to a Facebook report, roughly 10% of small businesses surveyed don’t plan to reopen after facing financial struggles due to the coronavirus — a number that may only rise.
Because the SBA has struggled to provide adequate support during the pandemic, we don’t know how the federal government will react once the unrest settles down. It’s possible the SBA will indeed be able to help businesses hurt by the rioting through its disaster loan program. However, with the SBA currently processing record numbers due to businesses struggling from COVID-19, it’s possible that any riot-related relief will take longer than usual to flow out.
State and city governments are also facing economic woes thanks to COVID-19 forcing back tax due dates and dropping overall revenues. This could affect how much monetary aid local governments can provide to businesses in the coming weeks and months. Additionally, more unemployment claims will simply add more stress to already struggling unemployment departments.
The Action: What You Can Do To Help Your Business
We currently live in an unprecedented time where there are no easy answers. Between the looming pandemic and the civil unrest that has gripped the nation, many small businesses will have a difficult time rebuilding in the months and years to come.
If your business has been hit by rioting and looting, we recommend that you first reach out to your insurance provider. If you don’t have adequate coverage, be sure to keep an eye out for SBA action or aid planned by your local governments.
You can also look to local organizations that raise money for small businesses or set up your own donation fund through a service like GoFundMe. If all else fails, we urge you to tell your story to local news organizations or simply by sounding off in the comments below.