How Atlanta restaurant owners view PPP loans

PPP, COVID-19, Atlanta Metro Area,

Source: Atlanta Business Chronicle

After a rocky initial rollout, Paycheck Protection Program loans are being processed and hitting the bank accounts of some small business owners. For Atlanta's restaurateurs, is the program enough to stave off the economic calamity leveled by the novel coronavirus pandemic? The answer varies.

Through April 13, accommodation and food services businesses in the United States have been approved for 108,179 PPP loans worth a total of $22,729,710,765. Businesses in the state of Georgia have been approved for 29,423 loans worth $6,725,718,213.

The Paycheck Protection Program authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. The loan amounts will be forgiven as long as proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the eight-week period after the loan is made; and employee and compensation levels are maintained.

Payroll costs are capped at $100,000 on an annualized basis for each employee. Not more than 25% of the forgiven amount may be for non-payroll costs. Loan payments will be deferred for six months.

Here is how some local restaurateurs are experiencing the program:

Empire State South

Celebrity chef Hugh Acheson applied for roughly $300,000 through Athens' First American Bank for his Midtown restaurant, Empire State South. Acheson told Atlanta Business Chronicle the process was "fast and easy," though as of Wednesday afternoon he had not received the funds.

Once the money arrives, Acheson will use it "pretty much all for payroll and rent." Empire State South's banking is typically done with Wells Fargo. Acheson went through First American as a backup plan.

"First American swooped in and helped me because of a prior relationship," Acheson said in an email. "ESS banks with Wells Fargo who can't tie their shoes ... on the rollout of this."

Rye Restaurants

Rye Restaurants, the hospitality company that operates The General Muir, West Egg Cafe, Yalla, Fred's Meat & Bread, The Canteen, and Wood's Chapel BBQ, applied for loans between roughly $155,000 and $525,000 for its businesses, according to co-owner Jennifer Johnson. The company applied through Truist and Atlantic Capital, "banks that we have a current banking relationship with."

Johnson said Rye Restaurants applied for the loans April 4 and April 5, and the first funds came through on the morning of April 14. In hindsight, she described the application process as "relatively easy," but admits that she "didn’t feel that way when I was doing the applications at midnight, the minute I got the application from the bank." Johnson credits her banking partners for communicating well, "even if we didn’t love all the answers we were getting."

The Rye Restaurants partners would like to see parameters for PPP loan forgiveness eased.

"We have no choice but to use the PPP loans to pay only utilities, rent, and payroll (including health insurance premiums)," Johnson told the Chronicle in an email. "For our restaurants that are still operational, we will return employees who are working for reduced salaries to full salary — the challenge is that with Georgia and federal unemployment benefits, employees can (as I understand it) make $965 per week now without working. It's hard for us to match that for some employees, so we understand that some employees may prefer to opt out of working. Since the chances of having the loan forgiven are still murky, it's dangerous to risk increasing our payroll too much to try to meet the forgiveness parameters.

"Additionally, some of our restaurants have sales so low that we're day-to-day on whether we should even remain open now, so spending money on payroll (especially when unemployment benefits are more generous than usual) doesn't make sense. We'd like to see the proportion required to be spent on payroll reduced from 75%. I'd like to be able to spend some of the loan on operating costs that support our vendors. We'd also like to have a lot more time to spend the loan proceeds — right now we have 8 weeks from loan disbursement. I don't imagine business being anywhere close to normal in 8 weeks. I hope I'm wrong, but ..."

Rye Restaurants applied for the Small Business Association $10,000 Economic Injury Disaster Loan grants for each establishment on April 2 and April 3. The company was under the impression these funds would arrive within 72 hours, but Rye Restaurants has not yet received the grants.

These grants work as loan advances, and Rye Restaurants does not plan to take out full Economic Injury Disaster Loans, which must be paid back with interest.

"For the long-term health of the restaurants we’d prefer to avoid taking on debt with no possibility of forgiveness, so for the restaurants that have some cash reserves we are working through the PPP option only at this time and working with vendors to put large purchases on credit cards and working with our credit card companies to defer payments (with no interest) for a few months," Johnson said.

Twisted Soul Cookhouse & Pours

Deborah VanTrece, who owns Twisted Soul Cookhouse & Pours, applied for less than $100,000 in PPP funds and has yet to receive any money. She also applied for the SBA's $10,000 Economic Injury Disaster Loan grant in late March. VanTrece says she spoke with an SBA representative who indicated the EIDL grant funds would arrive in roughly one month, as opposed to the 72 hours initially advertised.

"We are more concerned with the feasibility of the PPP loan," VanTrece said. "Consider that we will be required to bring back employees but the concern is if the public will feel comfortable returning to restaurants for a dine-in meal. We can't guarantee that we'll have enough business to satisfy the terms of the loan."

Char Korean Bar & Grill

Some restaurateurs do not have the option of turning down SBA and traditional loans. Richard Tang, owner of Char Korean Bar & Grill in Inman Park, has applied for more than $1.8 million in funds through PPP, the SBA and a line of credit from American Express. Tang has not received any money. Char is still running a takeout operation at a loss and providing free meals for restaurant industry workers, and Tang plans to continue for as long as he can.

"It's a day-by-day thing" he said. "Right now, we can probably float it for two more weeks. But I don't know what the nature of the world is going to be two weeks from now. I don't know what my bank account is going to look like two or three weeks from now."

Star Community Bar

Businesses that were on the cusp of opening before restaurants and bars were ordered to cease dine-in service are in a difficult position. In Little Five Points, the Star Community Bar was set to reopen under a new ownership team in late March. Obviously, that did not happen, and there is no telling when a new launch date may come.

Because Star Bar was not in operation before COVID-19 hit the U.S., it is unlikely to receive a PPP loan.

"We are attempting to get one, but it doesn’t not look promising for us," co-owner Luke Lewis told the Chronicle.

In the meantime, Star Bar plans to sell new T-shirts via its Facebook page. All proceeds will benefit employees.

Little Bear

At least one Atlanta restaurant is attempting to survive without a PPP loan. Jarrett Stieber, who opened Little Bear in Summerhill two weeks before Governor Brian Kemp declared a state of emergency, is skeptical of the program.

"My main concern was that the structure of the PPP loan is a catch-22," Stieber said. "They basically give you a loan for 2.5 times your average monthly expenses for rent, payroll and basic utilities (10 weeks worth) and say it can be forgiven, but only if it’s all spent in eight weeks and only on payroll, rent and basic utilities. That doesn’t include product cost, dry goods or any other forms of business related expenditures. And only 25% of the loan can be forgiven for money not spent on payroll.

"So it’s kind of like, 'Yeah, here’s money and it can be forgiven, but only if you spend it in these ways that make it impossible to spend it all.'"