A federal aid package for restaurants and other small businesses ran out of money — but not before some big businesses got cut checks, while small businesses got cut out entirely.
Part of the CARES Act stimulus program, the Paycheck Protection Program (PPP) was a $350-billion package administered by the Small Business Administration and designed to help companies with 500 employees or less.
But lawmakers expanded eligibility for companies as long as they had 500 employees or less at any single location — paving the way for mega-companies like Ruth's Hospitality Group, owner of the Ruth's Chris Steakhouse chain, which scored $20 million in loans; and Potbelly, which received a $10 million loan.
Meanwhile, according to the Texas Restaurant Association (TRA), hundreds of small operators across Texas not only did not get loans, they were not even able to get a response.
Bar owner Reid Robinson, who owns Brizo in Richardson, Texas, near Dallas, says he began applying almost immediately.
"I don't know of a single mom and pop restaurant or bar, including ourselves, who received an SBA loan via the ironically named CARES Act program, although big chains like Ruth Chris, PotBelly, and Taco Cabana quickly secured millions," he posted on Facebook. "We began applying two days after we closed on March 16th, stayed on top of the daily application changes, and had all of our financials in order, but nada. Zilch. Did anyone in our industry, who's not part of a larger franchise or chain, receive a stimulus loan?"
Comments on his post from other operators echoed his experience.
The SBA reports that it approved more than 1 million loans from 4,664 lenders, with the average loan size being $239,152.
Texas was the largest recipient out of the 50 states, with 88,434 parties receiving $21,776,306,479 in loans. The construction industry received the biggest sum: nearly $34 billion.
TRA president and CEO Emily Williams Knight says that, in addition to the shortchange on actual small businesses, the TRA is learning that if a loan was approved but not funded, the funding is not there.
"We know that the two sides are fighting it out with the Secretary of the Treasury in the middle," she says. "If the data does not show that this did nothing for a majority of restaurant owners, I am not sure what will."
A survey conducted by the TRA on April 15 found the following:
- 646 restaurants reported applying for a loan (which does not include those who could not apply because their bank was not a lender; did not have an SBA lender in their area; or were rejected by other banks)
- 59 percent of applications went to small regional or community banks
- 268 people were approved and 276 had not been approved
Knight says that the survey saw a direct split down the middle of 50 percent of applicants who'd received an update on their loan and 50 percent had not heard a thing. Restaurants had frustrating stories about every step in the program including:
• Inability to apply for the PPP loan because their lender isn’t participating
• Inability to find a lender to apply with because the borrower doesn’t have a history with said lender
• Lack of communication from the lender as to application or funding status
• Lack of guidance from the government or other experts on the implementation process
The TRA is asking Congress for a series of actions including revising loan restrictions to ensure that the loan terms match Congressional intent.
The SBA says it has processed more than 14 years' worth of loans in less than 14 days. "The high demand we have seen underscores the need for hardworking Americans to have access to relief as soon as possible," their statement said. "We want every eligible small business to participate and get the resources they need."
Celebrity chef Chris Cosentino called it "absolute crap," saying, "thanks for screwing the small business owner," and Andrew Ullom, owner of a bakery-cafe in North Carolina, said in an Instagram post that it seemed like "a really bad joke — like someone can't read the room and everyone stops to look at them like they’re some fucking moron. Joke's on us, though. That the SBA bailout for small businesses got gobbled up is some cosmically confused math. How does a company that profits $40million+ annually get $20 million in forgivable loans and actual small businesses get jack shit?"