Business owners across Long Island have long depended on the cash flow of the local consumer. Now, because of the housing slump and subprime loan crisis, there's less money for homeowners to spend.

So area business owners are watching their budgets and finding ways to do things differently. For those who are cutting, each move they make - from not replacing a computer to buying less materials to hiring fewer people - affects other companies and individuals as well. And that, experts said, is the fundamental danger to the local economy.

BY RANDI F. MARSHALL randi.marshall @newsday.com  found November 12, 2007 at newsday.com

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AMERICO ARAUJO
Restaurant owner- Port Jefferson

Even the loss of two regular customers can make a difference, Araujo said. Middle Island residents Rita and Larry Schel used to frequent Il Miradoro, Araujo's Italian restaurant, as many as five or six times a week. When Larry Schel became ill and the couple began to fall behind on their mortgage payments, they stopped coming.

"When you lose a customer like this, it's no good," Araujo said. But it's more than just the Schels. Araujo reported that business is off 40 percent compared with last year - and he sees a direct link between the rise in foreclosures and his restaurant's downturn.

"People aren't spending money like they used to be," he said. "I hope in a couple of years, it'll come back again."

VERA MOORE
Owner, cosmetics company-
Woodbury

Sales at Vera Moore Cosmetics were slow even before any problems in the housing market took hold, according to Moore. The housing downturn "just exacerbated everything," she said, noting that business is down about 10 percent from last year.

"People have to decide whether to buy lipstick or pay their rent," Moore said.

Loyal customers still buy - they're just buying less. And Moore is trying to build her business, hoping to solidify a partnership that would bring her cosmetics into a major department store.

"The idea is to be lean and mean," Moore said. "I never was afraid of a challenge or a risk."

BILL KEARNEY
Furniture manufacturer
Deer Park

Two years ago, residential furniture manufacturing and custom-fitting made up 85 percent of the business at Modern Furniture Manufacturing Co. Now, with a shift to more commercial and industrial work, it's just 10 percent. But even the shift in strategy hasn't helped the bottom line, as overall business at the manufacturer is down about 25 percent compared with a year ago. Its retail division, All Custom Furniture & Closets Inc., is seeing a particular downturn, as residents have stopped looking to customize furniture to fit their homes. Kearney, pictured at left, and his partner, Anthony Sollicito, far left, have downsized from 18,000 square feet of space to 3,100 square feet and cut back to five employees, from a high of 20. It's not just the mortgage market and the slowdown in housing sales that's hurting them; imports and gas prices are having an impact, too. But more trouble in the housing market could push the small company to the brink.

"If the housing market got some movement in it, and people started to sell some of the houses and others were moving in and they wanted a new kitchen or bedroom, that would trickle down and help us," Kearney said. "We're not seeing that. ... But we're going to try to weather the storm for another year, and see what happens."

FRANK PUGLIESE
General manager, auto dealer
Hempstead

Millennium Toyota, Pugliese's dealership, is still seeing an increase in business this year - but business has certainly changed. Instead of buying a Sequoia, a full-size sport utility vehicle, customers are asking for a smaller Corolla or Camry, Pugliese said. Those who started a lease three years ago, when the housing market was far better, are looking to trade in for something smaller and cheaper - especially when it gets better gas mileage, too, he said. And more customers are coming in with poor credit, making it more difficult to get them financing, especially when some of the subprime lending has dried up.

So, the dealership has had to change the way business is done and how customers are approached, but it remains financially strong, especially because Long Islanders still need cars.

"We're not suffering," Pugliese said. "There are too many unknowns, but we remain optimistic."

BEVERLY BALK
Interior designer
Glen Head

At Beverly Balk Interiors, it's business as usual - to an extent. The customers still are coming in, but they're asking for a lot less. Instead of designing a whole house, they'll pick a room. Instead of redoing a whole bathroom, they'll just replace the tile. They still want to hire a designer, said Balk, but they'll choose what is done based on need and cost.

As a result, Balk will be a bit more cautious in her own spending - and may be giving some of her suppliers less business in the coming months. She'll adjust her fee schedule to accommodate customers and will reach out to them for consultations, even when they're not yet ready to spend money on a project.

"We've survived many trends, and I intend to survive more," Balk said. "I think it's most important that everyone in the industry extends themselves just a little bit more. ... You have to adjust to the climate."

BILL HAILE
Environmental company owner
Deer Park

Nearly every part of American Ecotech Corp.'s residential business has taken a hit in recent months. The company offers a product that will mitigate mold for new homes - but builders are constructing far fewer homes. It will do environmental inspections, but real estate agents are calling less often. Business, said owner Haile, has been slashed in half.

So, he cut back on the number of subcontractors he uses and brought in his wife to help with marketing and other tasks he'd normally hire someone else to do.

Professionally, he has stopped ordering as many products, such as paper and other materials. And personally, Haile is selling one of his cars, cutting back on holiday shopping and choosing to make his coffee in the morning, rather than buying it from the local 7-Eleven or Dunkin' Donuts.

"I have to work a heck of a lot longer hours - 12- to 15-hour days seven days a week - just to keep my head above water," Haile said. "I think we're all going to have to get used to a lower economic standard of living."

OF INTEREST

Experts estimate that as much as a third of the region's economy is tied to housing.