Times are tough at SeaWorld, home of killer whales and bottlenose dolphins. But they’re even tougher at GeckoParx, a few hours down the Florida Turnpike.
Both amusement parks were forced to close temporarily when the coronavirus pandemic struck. Despite setback after setback, SeaWorld Entertainment Inc. — a publicly traded corporation — easily secured something that every business needs: credit. It borrowed almost $730 million in the capital markets. And smaller GeckoParx? It’s shutting its doors after burning through nearly all of its money.
The gulf between big companies that have ready access to credit and just about everyone else got wider in the fallout of the Covid-19 crisis, as the Federal Reserve blew open capital markets and pledged to keep interest rates low as long as needed. Bond markets are rarely an option for the likes of GeckoParx, with its 40,000 square feet of trampolines, ninja courses and arcades.
Even federal relief programs for small businesses — including a $525 billion lifeline that initially kept millions afloat — have often benefited the largest of small companies, those with established banking relationships. GeckoParx couldn’t hold on even with government help.
“I am at a point right now where I am just putting my hands up and walking out the door,” said John Duran, who founded GeckoParx in 2017 after over two decades of running family-entertainment businesses. “They didn’t even give us a chance to fight.”
The divide over access to corporate credit — who can get it, and who can’t — is likely to deepen. And what is happening in the business world is also happening at the household level: Americans with solid incomes and good credit are getting loans, while many others are getting turned away. The sharp line between these haves and have-nots, some economists predict, could be one of the lasting consequences of the pandemic economy.
“It’s absolutely unambiguous that monetary policy has increased wealth inequalities,” Nobel Prize-winning economist Joseph Stiglitz, a professor at Columbia University, said on Bloomberg Television. “Those at the bottom are having a very hard time.”
The fallout on the fragile recovery and labor markets will play out in the next few months. Small businesses employ almost half of the country’s private-sector workforce and have contributed about two-thirds of net employment gains in recent years. They so far have proved more resilient than feared thanks in part to Paycheck Protection Program government-backed loans. But the aid ended in August without reaching some of the tiniest and most vulnerable firms, especially those owned by minorities. Prospects for more stimulus before the Nov. 3 presidential election remain uncertain.
By one estimate, the number of U.S. small businesses has dropped by almost a quarter compared with January. That’s fueling concerns that large companies, some enriched by the pandemic’s impact, will move in to fill the void.
Before mid-March, GeckoParx was a successful business, pulling in $2.1 million in annual revenue, with a profit margin of almost 39%.
After being snubbed by several banks at the onset of the crisis, owner Duran received $32,700 from the Paycheck Protection Program and about $150,000 through the Economic Injury Disaster Loans, a separate federal initiative for small businesses. It wasn’t enough to cover the monthly rent and other fixed costs such as utilities and insurance. Two eviction notices followed, and Duran’s landlord personally sued him for almost $300,000 last month.
After a short trip to bankruptcy court, the 50-year-old entrepreneur has decided to close his park for good. Moreover, the house where he lives with his wife and two kids is now up for sale.
The personal toll is mounting for many other business owners across the country.