JNS
After the war upended small businesses in northern Israel, owners are rebuilding cautiously, adapting to a fragile new reality.
On the final day of Sukkot 2023, Eyal Elchanati arrived early at his restaurant in the Upper Galilee, ready for service. The refrigerators were stocked, the kitchen prepared, and the staff scheduled for a full day of work.
Focaccia, originally a 65-square-foot “window-service” stand that grew into a regional icon over two decades, had become a hub for locals and tourists alike. The Elchanatis sourced produce from nearby farms, employed local residents, and built a restaurant that anchored both community and economy.
Within hours, everything changed
Half of his employees were called up for reserve duty. News of the war’s outbreak spread rapidly. By mid-morning, it was clear the restaurant he and his wife had spent more than two decades building could not continue operating.
In the days that followed, as his family evacuated from Kibbutz Dafna and his children were called up to serve, Eyal Elchanati returned repeatedly to the closed restaurant—donating food, securing equipment, and dismantling what he could. What had taken decades to build unraveled in a matter of days.
For thousands of small business owners like Elchanati, this abrupt collapse was only the beginning of a longer struggle.
When war broke out on Oct. 7, 2023, Israel’s small business sector was among the first to be hit—and among the slowest to recover.
According to estimates published in 2025 by the business-information firm CofaceBDi, approximately 61,000 businesses closed over the past year, while about 37,500 new businesses opened, leaving a net loss of more than 23,000 businesses nationwide. The overwhelming majority of these closures were small, owner-operated firms—the backbone of local economies.
The impact has not been evenly distributed. While some central areas are beginning to show signs of renewed commercial activity, northern regions remain among the hardest hit, following prolonged evacuations, reduced tourism, and ongoing security concerns.
Small business owners face a dual challenge. Economically, access to credit is limited: despite making up more than 90 percent of all businesses in Israel, small and medium-sized enterprises receive only about 35 percent of total bank credit. High interest rates and tightened lending standards make it difficult to finance restocking or adapting business models.
At the same time, accessing government support has proven difficult. Emergency aid programs were announced after the outbreak of war, but business owners have reported long delays in payments, unclear eligibility criteria, and burdensome bureaucratic requirements. In many cases, aid arrived only after savings were exhausted, or businesses had already closed. Support frameworks often fail to account for prolonged displacement or disrupted customer bases, particularly in border and evacuated regions.
Taken together, these economic and policy barriers have left many small business owners struggling to survive, forcing them to downsize, pivot, or abandon long-standing ventures. Survival now depends less on external support than on personal resilience, community networks, and the ability to adapt quickly under extremely challenging conditions.
An uneven recovery
The impact varies considerably by region. While some central areas are beginning to see renewed commercial activity, northern regions remain among the hardest hit.
Business owners in the north describe operating in a market where demand is still far from pre-war levels and where local customer bases remain thin as communities continue to recover. This underscores that recovery is not uniform: for many, especially in periphery regions, return to stability remains elusive.
Faced with these headwinds, Eyal and his wife chose not to try to restart their old restaurant, but to adapt.
After months of uncertainty, they’re reopening in the first weeks of 2026 with a smaller, simpler food venture on Kibbutz Dafna. Klompus, a hamburger restaurant in the style of an American diner, requires fewer staff, lower overhead, and is easier to sustain in a fragile economy. Their choice mirrors a wider shift: small businesses are shrinking to survive, focusing on sustainability and stability rather than expansion.
“It’s a different model,” Eyal explains. “Smaller, more manageable, and more realistic for the situation we’re in now.”
Nationwide, entrepreneurs are cutting overhead, finding new revenue sources, and embracing flexible approaches that work even in a fragile post-war economy.
For many, survival has depended not only on personal determination, but on grassroots initiatives.
One such effort is the Western Galilee Now Small Business Consortium, working in partnership with Jewish National Fund–USA. In the aftermath of the war, the consortium launched the JNF Mitzvah Marketplace, an online platform connecting donors with small businesses producing care packages for evacuees, soldiers, and returning communities.
The initiative generated hundreds of thousands of dollars for local firms that had lost nearly all income sources. Beyond sales, it offered mentoring, marketing assistance, and strategic guidance to help owners adapt to new market conditions—where normal customer flows remain uncertain.
“For small businesses, uncertainty is often the deciding factor between survival and collapse,” said Michal Shiloach Galnoor, CEO of the consortium. “Our goal was to give them breathing room and practical tools to keep going.”
The consequences of small business closures extend far beyond lost revenue. These businesses are often the social and cultural anchors of their communities - places where people meet, work, and celebrate.
“When a restaurant closes, it’s not just income that disappears,” Eyal said. “It’s a piece of the community.”
In northern towns, where businesses often serve as social hubs, closures have left entire streets quiet and communities struggling to regain a sense of normalcy.
Looking ahead, carefully
Despite the challenges, there are signs of cautious recovery. Broader economic indicators suggest the Israeli economy is stabilizing after earlier contractions, with growth resuming in 2025, even if unevenly across sectors and regions. Preliminary data from the Central Bureau of Statistics show that the Israeli economy grew 12.4% in Q3 2025.
Across the country, recovery remains fragile for surviving business owners, Yet, they are listening to the experts and reimagining their operations to adapt to a new reality: downsizing, collaborating, increasing visibility on social media, finding new customers and new audiences, or applying different business models geared toward a fragile post-war economy.
“I still love what I do,” Elchanati said. “I’m optimistic. Things have changed and we have no choice but to adapt and move forward.”
