The Senate approved a $484 billion bill Tuesday that would inject $310 billion into the Paycheck Protection Program that ran out in less than two weeks.
Another $11 billion would be for administrative costs, meaning $321 billion was added to the program in total. A portion of those funds—$60 billion—would be set aside for small and mid-sized lenders that serve businesses in underserved communities.
The bill, called the Paycheck Protection Program and Health Care Enhancement Act, provides $60 billion for the Small Business Administration’s Economic Injury Disaster Loan Program, $75 billion for hospitals, $25 billion for COVID-19 testing, and $2.1 billion for other SBA expenses.
The House of Representatives is expected to take up the bill on Thursday.
On March 26, President Donald Trump signed the CARES Act into law, which included the $349 billion Paycheck Protection Program. The plan provides forgivable loans that small businesses must use for payroll (75 percent) and rent and utilities (25 percent). The funds come with an eight-week forgiveness period that begins as soon as the monies are disbursed. Although the legislative text said the loans have a 10-year repayment maximum, the U.S. Department of Treasury set it at two years.
Applications for the program opened the following week, and the $349 billion was depleted by April 16. While smaller mom and pop restaurants were left out, larger chains such as J. Alexander’s, Potbelly, and Shake Shack were able to obtain loans. Shake Shack returned its $10 million loan Monday, saying “those restaurants who need it most can get it now.”
Republicans originally wanted to replenish the Paycheck Protection Program with $250 billion, but Democrats blocked that move because they wanted additional funds for hospitals and states.
Although more money will come for small businesses, restaurants aren’t likely to be happy with the new bill since it contains no changes to the guidelines of the program.
Organizations like the National Restaurant Association and Independent Restaurant Coalition have said the eight-week forgiveness period should start after restaurants can reopen and that loan repayment should be extended to 10 years. Operators also believe restaurants should be able to use more than 25 percent of the loan on rent and utilities.
As it’s currently structured, restaurants that receive funds in April would have to spend it by June to qualify for forgiveness. But operators have argued that they may not open until June, so it wouldn’t make financial sense to bring back laid off or furloughed employees. They’ve also said workers would rather utilize enhanced unemployment benefits as opposed to returning to work.
Trump indicated Tuesday that after the funding is passed, there would be specific aid coming for restaurants.
“After I sign this Bill, we will begin discussions on the next Legislative Initiative with fiscal relief … to State/Local Governments for lost revenues from COVID 19, much needed Infrastructure Investments for Bridges, Tunnels, Broadband, Tax Incentives for Restaurants, Entertainment, Sports, and Payroll Tax Cuts to increase Economic Growth,” the president said on Twitter.
Both the Association and Coalition have suggested tax credits as a way to give aid to restaurants. The Association wants a 100 percent refundable tax credit that assists with reopening costs, like loss of business due to capacity limits, enhanced sanitation measures, and employee education. The Coalition has asked for a rebate that rewards restaurants based on how many they employ and another one for rent to ensure locations can maintain their lease.
But beyond that, the Association has called for a $240 billion recovery fund—equal to the amount it expects the industry to lose by the end of 2020. The Coalition wants a fund that provides up to $100 billion in grants to independent restaurants.
The Association estimated that more than eight million employees in the food and drink industry have been furloughed or laid off since the pandemic began, which accounts for two-thirds of the workforce.
The Coalition and James Beard Foundation recently released a survey that found 80 percent of independent restaurant owners aren’t certain their business will survive, even with financial assistance from the CARES Act.
Less than 9 percent of the loans approved by the Paycheck Protection Program have gone to the hospitality industry, according to the Coalition.
“Today we learned Congress does not care if local restaurants close forever,” the Coalition said in a statement. “The Senate passed new funding for the Paycheck Protection Program but until that program is fixed, it still won’t help America’s 500,000 independent restaurants reopen or ensure their 11 million employees have a job when this ends.
“… The last stimulus bill included a special $25 billion carve-out to keep 750,000 airline employees working,” the Coalition added. “Why not make a few changes to help independent restaurants, who employ 15 times more people? No one wins when one of America’s biggest and most beloved industries fails. If Congress is serious about putting the economy on track and reducing unemployment, they need to act on a package that helps independent restaurants survive this crisis.”