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Congress Just Passed a Bill That Will Help More Restaurants Survive

Small businesses will find it easier to receive loan forgiveness.

herbfarm woodinville Photo: courtesy Herbfarm

Restaurants struggling from the Covid-19 shutdown received a slight reprieve late last week. Congress passed a modification to the Payroll Protection Program (PPP) that will give small businesses more flexibility to spend their government-backed loans while remaining eligible for debt forgiveness.

Now, instead of having eight weeks to spend the money, small businesses have through the end of the year; and instead of 75 percent of the loan needing to go toward payroll, 60 percent must go to workers with the remaining balance helping with rent, food costs and other expenses.

The program was part of the larger stimulus package passed in March. As Covid-19 ground the American economy to a halt, Congress created the Coronavirus Aid, Relief and Economic Recover (CARES) Act to inject $2 trillion of capital directly into the market. Inside that bill was the PPP, which earmarked $350 billion for small businesses that, if the companies followed guidelines, the loan would essentially convert to a government-backed grant.

The problems with the Small Business Administration’s program rollout were legion. Money intended for small businesses was hoovered up by large corporate chains like Ruth’s Chris and Shake Shack (each gave the loans back after Treasury advised they may not be eligible for forgiveness). Banks complained the guidelines for forgiveness were unclear, making them weary about the program. And then the first $350 billion ran our almost immediately. The idea was the PPP would funnel money to small companies that don’t have ready access to capital markets and that original iteration fell short on that front.

Congress followed up a few weeks later with an additional $310 billion, with more of the money set aside for community banks. In that original tranche of PPP, community banks proved themselves more adept at servicing small businesses than big banks like Chase, which favored large institutional clients in the early days of the PPP.


Restaurateurs argued the original structure of the program didn’t work for them because Covid-19 shutdowns would affect their businesses for months to come, not just eight weeks. Once they spent all the loan money, they’d have to lay people off again for lack of sales. Now they can spend that money in a way that lets them ramp up more slowly and have capital that allows them to fully reopen for dine-in service.

“This reality we’re in right now has two different parts, and I really think we’re in the easy part now, which is just surviving through the shelter-at-home orders,” the Michelin three-star chef David Kinch previously told Robb Report. “The hard part is going to be opening the restaurant back up.” Restaurants now have more funds readily available to help with that transition.

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