Unforgivable? Restaurants fear loans won't bring relief

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This April 24, 2020 file photo shows the empty outdoor seating area at the closed Franciscan Crab Restaurant at Fisherman's Wharf in San Francisco. Restaurant owners and executives across the country fear theyll have to repay thousands of dollars in potentially forgivable loans from the Paycheck Protection Program because rules written by the Small Business Administration are out of sync with the reality these businesses face _ many are still shut down by state and local government orders, and those that have reopened have drastically reduced revenue. (AP Photo/Eric Risberg, file)


NEW YORK – Restaurants owners across the U.S. are worried that a loan from the government’s coronavirus relief program could wind up being a burden instead of a blessing.

The Paycheck Protection Program has disbursed more than 4.3 million loans worth more than half a trillion dollars to small businesses in about six weeks. A PPP loan can be forgiven if owners spend the money within eight weeks of receiving it and put at least 75% of it toward employees’ pay and the rest toward rent, mortgage interest and utilities.

For those who own and run restaurants, however, those terms can seem out of sync with the realities of their business. Many restaurants either remain closed or are doing just a fraction of their former business as cities and states only begin to lift stay-at-home orders. Instead of essentially paying workers not to work, owners might want to hold onto the loan money or use it for more pressing needs; but doing so carries a risk.

Sarah Trubnick’s restaurant in San Francisco has been closed since mid-March. She recently got a relief loan — but she’s hardly celebrating.

Trubnick hopes to reopen The Barrel Room within the next eight weeks, but it will cost thousands of dollars to buy food and equipment needed to be operational again. She needs to use some of the loan money to pay those expenses. But that portion of the loan might not be forgiven, leaving her with a big debt to pay off in two years.

“The terms are not realistic for us,” says Trubnick. “I think this is going to leave us in a worse position than before.”

The restaurant industry has been one of the hardest-hit by the virus outbreak. Thousands have been shut down completely, which means no revenue coming in but bills like rent, utilities and insurance still to be paid. Many others have been restricted by state and local governments to serving customers with takeout and delivery, but that is only a small fraction of their usual business. And reopening doesn’t mean a return of the lunch and dinner crowds — social distancing requirements means restaurants can’t serve the usual number of diners.