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Closed Restaurant

10,000 Restaurants Have Closed In The US Since September 

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According to a trade group that has been working to get Congress to provide some sort of immediate financial relief to the restaurant industry in America, over 10,000 food establishments have now shut down either temporarily or permanently due to economic troubles brought on by the Covid-19 pandemic. 

Many restaurant and small business advocate groups throughout the nation are calling on lawmakers and pushing Congress to approve of a $120 billion bill that would help assist eateries and independently owned restaurants a fighting chance to survive the rest of the pandemic. There are around 500,000 independent restaurants throughout the country that rely on local consumerism to remain afloat. 

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These groups also want the government to revive the Paycheck Protection Program which was initially aimed at protecting small businesses, however, after the initial rounds of these payments, many businesses soon realized a majority of the money was going to largely owned multi-million dollar companies. Even worse, the program didn’t have a specific fund set aside for restaurants only, so they were especially left in the financial dust. 

This summer the US eased a lot of its restrictions for outdoor in-person dining, which allowed the industry to bounce back a little, however, with the winter season fully approaching and now a massive surge of new Covid-19 cases also appearing, many cities are moving to shut down again. Sean Kennedy is an executive vice president for Public Affairs at the National Restaurant Association (NRA) who recently sent a letter to Congress on behalf of the entire association and independently owned restaurants all over the country. 

“More than 500,000 restaurants of every business type are in an unprecedented economic decline. For every month that passes without a solution from Congress, thousands of more restaurants will close for good.” 

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A recent survey performed by the NRA showed that of its members, almost 6 in 10 chain and independent restaurant operators expect to lay off or furlough employees consistently within the next three months. In November, the number of workers in bars and restaurants declined by about 18,000, after being on a steady increase since April when these establishments were able to reopen and keep their workers employed. 

Beyond just the lack of customers, restaurants are also worried about working in the middle of a global health crisis that is killing hundreds of thousands. Ashwin Deshmukh owns an all-day cafe and bar in New York City, and he recently spoke with the local media about how intense this pandemic has actually been for the industry. 

“Owners are really worrying about not being able to cover fixed costs amid the demand destruction caused by the pandemic. Costs are higher due to spending about $100 per week on personal protective equipment.” 

Getting through the winter will pose a major struggle for the industry unless another government funded assistance program is distributed among all the small businesses and establishments that are just trying to remain afloat during the worst global health and economic crisis’ in decades.

PPP Loan

Why Some Businesses Are Hesitant To Apply For PPP Loan Forgiveness 

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This week, the Small Business Administration opened up their forgiveness portal for the Paycheck Protection Program (PPP) loans. The CARES Act initially made these loans available for small businesses who were struggling to stay afloat during the pandemic. The Act went into effect in the beginning of April, and since has dealt out more than 5 million approved loans which equated to $525 billion. 

To qualify, small businesses had to show that at least 60% of the loan would be going towards payroll costs for employees. The repayment terms of these loans are also relatively casual in terms of federal loans, as most firms will only pay an interest rate of 1% and have at least a six-month grace period before needing to start payments. Loans that were given before June 5th must be repaid in two years while those dealt out after have five years. 

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Even with all of these seemingly attractive qualities, accountants nationwide are noting that many small businesses are choosing to sit out this round of PPP loans after the initial round of loans began going more towards large corporations and wealthier employers who didn’t really need the financial support as badly. 

Additionally, many small businesses are still asking Congress the same question in regards to these loans with no real answer: will expenses covered by these PPP loans be deductible on future tax returns? Ann Kummer is a Certified Public Accountant in New York who claims to be giving a lot of her clients the advice to wait before applying for a federal loan. 

“My advice to all of these clients is that you don’t want to be the first to rush into the forgiveness process. Things will probably continue to change, do you really want to be the guinea pig?”

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Many small businesses feel the same way, especially considering so much change has already occurred in terms of the pandemic and its impact on the economy. There’s still no word from Washington D.C. on what the next Covid-19 relief bill will look like either, something many Americans have yet again been waiting for. 

According to the IRS, forgiveness of the loan will be tax-free, but business owners who take out a PPP loan will not be able to write off expenses that in any other context would be deemed deductible if they use the PPP funds to cover that cost. However, many Congress members disagree with the IRS’ claims and want small businesses to be able to deduct those costs, making this one of the many points of contention that’s delaying the release of another relief bill. 

Overall, many business experts and accountants nation-wide are urging their clients to hold off and wait in terms of applying for one of these PPP forgiveness loans. While many businesses are suffering now, depending on how much this loan program changes the damage could become a lot worse for them down the line. 

Experts recommend that all businesses maintain a separate business account for all of their loan proceeds so they’re able to see exactly what they’re receiving and when they are spending it. Additionally all businesses should maintain any and all documents that show how their funding has been spent throughout the duration of the pandemic. This way, no matter how much the pandemic and the forgiveness program changes in the coming months, businesses will have a formal record of spending and receiving.

Small Business working during COVID-19

Small Businesses Demand Greater Financial Protections During Coronavirus Pandemic

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As the many small businesses of America struggle to stay afloat during this pandemic that requires everyone to stay inside, the Small Business Administration (SBA) is working to ensure that they’re as protected as possible to survive this economic crisis. The SBA recently issued a new set of guidelines regarding their loan system that’s meant to make it less likely for big businesses to access the next round of funding that the US government deals out as a part of its small business relief program.

After the first round of small business payments were dealt out by the government, many individuals expressed their outrage online that so many large companies in the US were able to access the resources and thus take it away from actual small businesses that need the money. There are currently still thousands of small businesses across the country that haven’t received any sort of financial protections from the government, while hundreds of millions of dollars in loans have already been given to larger corporations. 

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According to the SBA, any companies now applying for coronavirus relief funding, referred to as the Paycheck Protection Program or PPP, must certify that the loans are necessary, and the only option for the business in terms of financial compensation. 

“Borrowers still must certify in good faith that their PPP loan request is necessary. It is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification,”  the SBA said.

The initial round of funding dealt out $350 billion to various companies throughout the US. For the second round, an additional $310 billion will be given out to hopefully new small businesses that need it, however, industry executives aren’t expecting this fund to last that long, as the first round of PPP payments was finished after a little over a week. 

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Helping small businesses stay alive was actually president Trump’s administration’s main goal when creating the $2 trillion-plus economic response fund for the coronavirus pandemic. During the initial round of funding is when small businesses became angry, however,  as large restaurant and hotel companies were able to apply for loans up to $10 million, and a majority of the ones that did were companies that were worth more than $100 million in stock. 

JPMorgan Chase and Bank of America have been two of the bigger corporations dealing with the ins and outs of these small business loans for most companies throughout the country, and thus they’re also receiving the most criticism for the first round of payments. Small businesses are claiming that this is a classic example of corporations looking out for one another while disregarding smaller businesses struggling to survive, a claim that JPMorgan has denied.

In the new SBA guidelines, the Administration is appearing to allow banks to rely on the small business claims exclusively as evidence for why they need the loan. However, the guidelines also state that any bank that dealt out a PPP loan to a larger public company in the initial round of payments can avoid any sort of repercussions by returning the relief loans within the next two weeks so the money can be redistributed.  

Hopefully these new guidelines help the millions of small businesses across the US survive to see this pandemic end and thrive once we return to a world of normal local retail therapy.