Small business winner blames slow economy for bankruptcy

Grace Leong

Monday, Oct. 22, 2001 | 10:58 a.m.

Six months after she was named Nevada's small business person of the year, Julia Valdes' Las Vegas flower company has filed for bankruptcy protection and is blaming many of its woes on the economic fallout of the September terrorist attacks.

Flowers2u.com, which receives 50 percent of its business from the Southern Nevada gaming and convention industries, said it was forced to file for Chapter 11 bankruptcy protection on Sept. 28 after the attacks caused the cancellation of hundreds of meetings, conferences and conventions and a severe downturn in business on the Las Vegas Strip.

Jerry Stephens, SBA's deputy district director for Nevada, declined comment on the bankruptcy of Flowers2u.com, an SBA borrower and a company the SBA had showcased in March when Valdes was named Nevada's small business person of the year.

But he said the number of SBA loans in Nevada that are in the process of being liquidated has risen to about 150 from 50 last year due largely to an economy that was slowing down even before the Sept. 11 attacks.

"There's no evidence that the Sept. 11 events made any particular contribution to that increase in Nevada," he said. "Although most of these loans are in liquidation ... the majority of these may still be saved as long as the company remains in business. The SBA can assist with the re-amortization of the loan to get the business back in a profitable situation."

"Small businesses here haven't been requesting assistance as yet at this point in time (because of the terror attacks)," he said. "The SBA did declare (on Oct. 18) an economic injury disaster assistance loan or a low-cost interest rate loan for small businesses nationwide that can prove that their sales were drastically reduced in the aftermath of the Sept. 11 attacks."

Flowers2u.com said it was already affected by unusually slow sales this summer due to a slowing economy.

"The Sept. 11 tragedy hit many businesses that support the casino industry. Ours was one of them," said Jose Valdes, Flowers2u.com's president and Julia's husband.

"We had 20 trade events for September but all of them cancelled due to Sept. 11's events. In some cases, we couldn't even hold some of the conventions to cancellation fees unless we had already bought the materials," he said. "Sept. 11's events hit us hard also because we were coming from an unusually slow summer."

Valdes said the company saw a 20 percent to 30 percent reduction in orders this summer from several casinos it had signed contracts with earlier this year, as the slowing economy forced the casinos to cut low-priority expenses.

"It couldn't have happened at a worse time because we had just finished expanding our warehouse and adding additional refrigeration units and telephones to handle the increased business coming from several casino accounts we had picked up nine to 10 months ago," he said.

The company expanded its 1,100 square-foot warehouse at 3351 Highland Drive to 4,000 square feet in July.

"After Sept. 11, things got much worse. It wasn't just the casinos and trade conventions cancelling, but also the local receptions and parties," he said.

Flowers2u.com said its monthly sales this summer dropped to $45,000 compared with last summer's monthly sales of $55,000, while its sales in September plunged to between $40,000 and $50,000 compared with $70,000 last September.

Julia Valdes is a 60-year-old Mexican immigrant whose passion for flowers prompted her to start the firm and helped her win the small-business award.

She remains undaunted by the events of Sept. 11.

Valdes, who survived being laid off in 1996 by her previous employer, a major casino that had told her she didn't have the skills needed to work at its floral department, said: "Nothing lasts forever. That's life. It doesn't bother me because I still have my hopes and will continue with the job we're doing. I'm very positive we'll get over this."

The company said it hopes to emerge from bankruptcy in three to six months as orders from casinos and conventions have picked up in the past two weeks.

The company listed assets of $150,396 and liabilities of $384,536 in its filing. Its gross monthly income for September totalled $55,823 while its total monthly expenses were $54,397.

Its largest creditor is Bank of America, which issued a $92,434 loan that's guaranteed by the SBA. The company said it used part of the loan proceeds to fund its warehouse expansion and to open a 1,300 square-foot retail store at 10100 South Eastern Avenue in Henderson in February.

The formerly 13-worker company now has seven workers after laying off three in summer and another three after the Sept. 11 attacks. But it is now re-hiring some of these displaced workers on a part-time basis.

Despite Flowers2u.com's apparent recovery, Mr. Valdes said the events of Sept. 11 exposed his company's vulnerability to the fortunes of the gaming industry. He said he is now aiming to make the company more diversified with a greater emphasis on growing its local business.

The company said it plans to open a second 1,000-square-foot store in Summerlin next year targeting local customers.

Flowers2u.com also said it was selected by Wal-Mart's Sam's Club as one of three small businesses nationwide to be profiled in the discount retailer's Christmas catalog this year. It said this advertising effort will introduce the company to 14 million homes nationwide.

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