Restaurants are among the businesses hardest hit during the coronavirus shutdown. The National Association of Restaurants. estimates that 3 million restaurant employees lost their jobs in March, a month in which restaurants lost an estimated $ 45 billion in revenue. The industry is bleeding.
But as airlines benefit from a $ 25 billion bailout, the CARES Act – a federal stimulus package for businesses and individuals affected by the coronavirus pandemic – and its centerpiece, the Paycheck Protection Program, is the equivalent of a bandage – one of the little ones that wrap around your finger.
This leaves local restaurants and other small business owners wondering: where is the money? In the meantime, big chains like Ruth’s Chris Steak House and Potbelly Sandwich Shop are allowed to empty the fund, having secured multi-million dollar loans.
PPP is a Small Business Administration loan program designed to provide financial relief to small businesses. Businesses can apply for up to 250% of their monthly payroll: if your payroll is $ 100,000 per month, you can apply for a loan of $ 250,000. Loans are canceled if 75% of the money is used to pay employees.
Sounds simple, right? In reality, it didn’t work that way, especially for small independent businesses.
After the opening of applications on April 3, the ASB announced On Thursday, the $ 350 billion allocated to the program was gone, saying, “The SBA is currently unable to accept new applications for the Paycheck Protection Program based on available credits.”
This leaves many businesses, especially clients of large banks who prioritize their high net worth clients, in the dark. Less than 6% of applicants received their PPP loans, according to website COVID Loan Tracking, which compiled data from 15,000 small businesses. The hotel industry is doing badly; despite being among the hardest hit, only 9% of loan approvals went to ‘accommodation and food services’, according to the SBA.
The vast majority of the nation 30.2 million small businesses were left to float in the wind. Meanwhile, the rich are getting richer.
According to a public deposit, Potbelly Sandwich Shop, a publicly traded company with 474 locations and 6,000 employees at the end of last year, has received approval for funding of $ 10 million. Ruth’s Chris Steak House was approved for $ 20 million; he overturned the loan limit of $ 10 million by applying through two subsidiaries, according to the SEC filing.
Banks, of course, will benefit. Collection of fees ranging from 1% for loans over $ 2 million to 5% for loans under $ 350,000, they could make billions with P3.
This has left independent business owners puzzled, disappointed and angry.
Andy Ricker, owner and chef of Thai restaurant chain Pok Pok, wrote that his loan application was on hold and that he and other small business owners had been “snooked by publicly traded companies who received millions and left independent small businesses in the gutter as the well dried up.” .
In Sonoma County, Crystal Nezgoda had a similar experience when she tried to receive money for her. Honey Badger Coffee in the Rohnert park.
“I applied for both the PPP Loan and the Disaster Loan / Grant and have not received either,” said Nezgoda, who has since started a GoFundMe.
Sonny Zaide, owner of Purple cloud in Chicago, criticized the generous business loans on Twitter, writing: “Meanwhile, people like me with * real small businesses * ie those of us who are individual operators who just want a few thousand just so we can feed our families, are SOL. “
I spoke to Jill James, owner of a small business consulting firm Sif Industries, and asked if the PPP provided relief to small businesses in need.
“No,” she said, “it’s not an effective program to put money in the hands of small businesses.”
James, through webinars and online offerings, says she’s worked with hundreds of small businesses over the past three weeks, including bars and restaurants. “None of them received any money. “
But why have loans to companies like Ruth’s Chris and Potbelly been made when there is so much need within the independent business community?
“I’ve spoken to bankers across the country,” James said. “One of the first things the banks did was make bigger loans.”
This left small borrowers left out.
“I haven’t seen anyone with an application for less than $ 50,000 get funding,” she said. Freelancers and sole proprietors – which include businesses like caterers and food truck owners – are in an even worse situation as they were only able to apply for funds on April 10, a week after the official opening of the stores. loan requests. They “haven’t really had a chance to fight at all,” she said.
James herself owns a small business. She also applied for a loan and received nothing. “I’ve been waiting eight days,” she said. “And I know what I’m doing.”
The wait has been tortuous. “It creates a crater of confidence,” she said. “It makes you extremely uncertain.”
This isn’t the only time small business owners are wondering what happened. Go get Em Tiger, the LA coffee chain (which also serves A-plus food), opened in 2013 and has 128 employees. Over the past four years, it has expanded to nine locations, up from two, a perfect example, in some ways, of a young, growing company.
Co-owner Kyle Glanville said he started thinking about how to put money in the bank even before Los Angeles Mayor Eric Garcetti announced the closure. He began to apply for any loans he could get his hands on, hoping to amass a comfortable financial cushion to help him deal with whatever was about to come.
As for the PPP loan, he said he had done everything according to the rules. Glanville got up at 4 a.m. on the day the PPP loan applications were opened and began to refresh the computer. At 6 o’clock in the morning, he was able to pass. At 6:20 a.m., he said, he had submitted it.
When the CARES law was enacted on March 27, he allowed himself to feel a bit of optimism.
“I really felt like they had designed a program just for us,” he said.
Glanville contacted someone at Bank of America, GGET’s lender, who assured him, “You are the first of my clients to get their jobs and I imagine one of the first, period. The approval seemed to be acquired in advance. “We have done all of our diligence, we have made sure that all of our information is correct,” said Glanville. “We are the target company for this stimulus. Ended!”
Days later, no word. A few people he knew who had applied through small regional banks began to see approvals. He started checking online and calling about the status of the loan – no update and no explanation. Meanwhile, the company, which has switched to pickup only, is bleeding money. “It’s completely disheartening,” he said.
The money he asked for is needed more and more with each passing day. “We were able to support it and keep the trade going,” he said. “But only because of the non-payment of rent and the postponement of bills that will come due at some point. It is an absolutely essential program for us.
Glanville, like James, ticked all the boxes. He already had a relationship with a big bank; he applied the morning the applications went online. If this is also difficult for those who have experience with the banking system, what about business owners without banking connections or those who face language or cultural barriers?
James also pointed out the critical nature of quickly pumping money into a business and how endless waiting can cause irreversible damage.
“When you don’t get a loan on Tuesday or Wednesday, you have to make decisions. You don’t have days and weeks to wait, ”she said. “It’s not just about wasting your money; it’s losing your employees who are the heart and soul of your business.
And now? James said those who weren’t organized before have a chance to organize now so they can apply if and when Congress opens up more money for small business owners. They also have time to choose a better lender: a regional bank or online loan brokers like cabbage Where Fundera.
Those who have already applied may be out of luck at the moment. “Unfortunately, as of this morning, if you don’t have an SBA guarantor number you will likely have to reapply,” James said. “The queues we had are out the window.”
Restaurants, more than any other type of small business in this country, are symbols of promise. They are frequently opened by immigrants and first-time business owners, non-English speakers, and others who just want to feed others and provide for their own families. For many, restaurants and small businesses are the quintessential entry point into the dream of creating a life in America and standing on your own.
This dream is quickly dying, and our government has been particularly ruthless during this crisis. If we can bail out our bloated airlines, we can bail out our little restaurants. They need the money, with few or no strings attached, and they need it fast. Otherwise, those beloved institutions that give character to our cities and stimulate our economy will disappear, and they will not return.