Big chains got small business loans. Many Sacramento restaurants were left out and may close
The Small Business Administration’s $349 billion Paycheck Protection Program launched on April 3. When all the money was announced to have dried up on Friday, restaurateurs across the Sacramento region were left wondering where it could have gone.
Those seeking relief are sitting, waiting to hear if the next round of funding — another $310 billion, to be voted on by the House of Representatives on Thursday— will net them the easily forgivable loans for which they applied. For many businesses, it could be the difference between surviving the coronavirus shelter-in-place directive or folding.
Even business owners who applied within a day of the PPP’s opening found themselves stymied by intense competition and overwhelmed banks. Nick Dedier, chef and co-owner of Milestone Restaurant & Cocktail Bar in El Dorado Hills, said the SBA approved his restaurant for a $253,000 loan that never came to fruition.
Once approved, Dedier handed Milestone’s financial information off to an accounting firm to make sure its PPP application would be ready for the banks on April 3. It didn’t matter. Wells Fargo and Banner Bank both wrote Dedier back after he applied that night, saying all their PPP funds had been bookmarked.
“I don’t know any small, independent restaurateur or entrepreneur that has gotten any money at all from PPP, and I know a lot of people,” Dedier said. “The only thing I’m seeing on the ground is frustration with it. I don’t see any relief at all.”
The PPP offered loans of up to $10 million over two years, forgivable if at least 75 percent of the money is used for payroll. The loans were advertised as being intended for businesses with fewer than 500 employees, and businesses could apply for up to 250 percent of their monthly payroll.
Yet the National Restaurant Association successfully lobbied for eateries and hotels to be exempted from that employment base restriction, and chains with hundreds of locations including Shake Shack ($10 million), Potbelly Sandwich Shop ($10 million) and Ruth’s Chris Steak House ($20 million by applying through two subsidiaries) all got PPP money. Shake Shack announced Sunday it would return its loan after raising $140 million in Class A shares, but the SBA can’t redirect that $10 million toward loans for other businesses without Congressional approval.
“So many people grabbed so much, and now there’s none left for all the people that need it,” Dedier said.
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Milestone is relatively high-end, the type of restaurant that can afford to retain an accounting firm to get its application in the first day the PPP opened. Chef/co-owner Edward Stoddard of La Bonne Soupe Cafe tried to organize the financial documents for his five-person staff independently and became overwhelmed by the hundreds of pages banks wanted to process the loan, he said.
Stoddard was working on an application to Merchant National Bank after being turned away from or deciding not to pursue loans with three other banks when the SBA announced it had run out of cash, he said. He has to start over now to be included in the next round of funding.
“It’s a hard process. I’m really confused,” Stoddard said. “I wish it would have happened another way. Small business advocacy is really hard to find. When you’re not a big business, you don’t have lawyers, you don’t have an accounting team, so you’re stuck trying to do this on your own.”
Stoddard isn’t the only small business owner who feels shortchanged. Four major U.S. banks – Bank of America, Wells Fargo, JPMorgan Chase and US Bank – were the target of lawsuits this week accusing the financial institutions of favoring large businesses in the PPP program. Bank of America and US Bank have denied the allegations, while JPMorgan Chase and Wells Fargo have declined comment, according to CNN.
The operators of Q St. Bar and Grill, better known as Benny’s, voiced their frustration in a Facebook post Saturday.
“PPP already out of funds?” the post read. “The government has failed us. The local banks have failed us.”
The Senate approved a $480 billion relief package Tuesday that includes $310 billion for the next round of PPP funding, $60 billion of which has been reserved for smaller financial institutions such as credit unions and local banks.
Dedier will take whatever money he can get to keep Milestone humming, he said. But he’s not expecting much.
“It’s just what comes with being a small business owner,” Dedier said. “You just have to roll with the punches and this is a left hook from Mike Tyson ... we’re just trying to stay on our feet so that the next round, we can kick some a--.”
