Some independently owned restaurants are planning to return the loans they have received from the federal government due to concerns about the conditions the loan program imposes, the Financial Times reported Wednesday.
In order for loans provided by the $660 billion Paycheck Protection Program to be forgiven, small businesses are required to spend 75% of the money they receive on payroll within eight weeks. The remaining funds can be applied to overhead expenses including rent, but any money that is not used according to the guidelines must be repaid in two years, with 1% interest.
Plenty of restaurants initially jumped on the PPP loans to help them get through a rough patch, but with many now closed and facing an uncertain future, the idea of taking on additional loans has lost its appeal. As a result, many are likely to return the loans they received, says the National Restaurant Association.
“It was a great idea in the beginning — but it turned out to be another loan which I don’t need,” one Pennsylvania restaurant owner told the FT. “I have plenty of loans already. The attraction to this was the forgiveness.”
Millions of jobs at stake: The restaurant industry employs an estimated 12 million people, and about 8 million of them are currently furloughed. Congress designed the PPP in an effort to keep small business employees on the payroll, but the window for doing so is closing for many independently owned restaurants, which may have to remain either partially or fully closed for weeks more, if not longer.
As some restaurants rethink the PPP, some are hoping that Congress can step in with an aid package designed specifically for the industry. More of the money would need to be available for rent and other fixed expenses, the National Restaurant Association says, and the requirement to pay workers would have to be delayed until the restaurants fully reopen.