The Problem With PPP Loans
Good Day Good Friends.
Another week down, another 1896.5 things to consider and reconsider. We had a great and successful patio pop-up last week at Jax LoDo, Boulder and FoCo. For all of you who took part, we hope you enjoyed everything. We will be making some changes moving forward as we learn how to do these types of things better—more recipes, instructions, and “how tos.” This coming week we are rocking it out at Lola with a bunch of great items on the menu, which is attached. The deadline for ordering is tomorrow, Wednesday, at noon. Pick up is this Saturday, April 25th at Lola Coastal Mexican, 1575 Boulder Street in the Highland neighborhood. On May 2nd, we will be doing another Social Distanced Patio FunFest at Jax, again in Lodo, Boulder and FoCo, and adding C. Springs to the party list on May 2nd as well. Announcements and menus for the Jax event will go out this Thursday, April 23rd.
For all of you reading this email, I ask for your help. The PPP loans provided by the SBA are an amazing lifeline to many small businesses. But the timeline and measurement metrics for the loan forgiveness is not tenable. The start date of the 60-day evaluation period begins when we receive the money, which for many of us was last week. From that point, and for the next eight weeks, businesses need to employ 100 percent of the employees they had on their rosters in January and February. Two fundamental flaws in this scenario:
1. Many of us have restaurants that are not open currently and therefore have no employees on the payroll currently. We are in a mandatory shutdown which may not be lifted until later in May. This means that we will have maybe three weeks max to qualify and maximize the amount of loan forgiveness. As we will be at revenue levels enormously lower than our normal sales, we will not be at full employee capacity. So there are a host of facts and realities, that are going to leave small businesses at a real disadvantage to having any of these loans forgiven, meaning we will all be taking on an enormous amount of debt.
2. That debt matures in six months and payments begin on these loan amounts in November for most businesses. Based on all predictions and models, we will not have a vaccine for Covid at that time and another outbreak is predicted as the weather turns cold again. If these loan terms do not change, this is going to be when you see catastrophic small business failure. Small businesses cannot support this debt load at 50 percent or less of revenues.
The airline industry employs 750,000 workers. Last week, the US Federal Government announced that they will pay all airline employees’ paychecks, for the next six months. This allows the airlines to focus on operational efficiencies and to figure out the new road to profitability, while they don’t have to worry about payroll for 180 days.
The restaurant industry employs 16.5 million workers. And the US Federal Government has given us a 60 day period, while we are closed and at half revenue, to solve our payroll challenges and get our workers employed again. Four months after that, we will all be left on average with 70-80 percent of our full loan amount, due to be paid back.
Please reach out to anyone you know, and use all the resources you have to bring this situation to light. It is going to create an absolute end to many of your favorite small businesses in the next year. Many of us will get re-open with our passion and adrenaline and tireless work ethic, cause that is what we restaurant folks do. But reality will have a heavier hand in the outcome of all of this when many, many small businesses—not just restaurants—are closed a year from now because this loan program actually created more impossibilities than realistic solutions.
Now just months into this global pandemic, we aren’t even in the first mile of this new marathon. The real test is yet to come. We need to balance the scales and have some real intelligence at the table to make all of this work. Please lend a hand in that discussion whenever you can. The bigger the choir, the louder the song.
Big love to all y’all. Stay safe. Stay healthy. Stay laughing.
Chief Pot Stirrer
Big Red F Restaurant Group.
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