Where's the beef?
The Paycheck Protection Program (PPP) that was created as part of the CARES Act is great at providing salaries to millions of workers in order to keep them from applying for unemployment. However, by design, it is not great at saving small businesses, particularly social gathering spaces in NYC. After all, it was named the Paycheck Protection Act, not the Small Business Protection Plan.
Our staff is already unemployed
It is nearly impossible for bars and restaurants to hire our staff back given that unemployment is currently a better financial option. While the CARES Act $600 per week unemployment boost is well intentioned, it essentially negated the ability of many small businesses to rehire staff in order to meet the requirements of the PPP.
Retention risk negates forgiveness
Even if we can successfully re-hire in the short-term, there is too much risk with retention. For example, what if an employee quits to move back home in another state, becomes ill, or needs to take care of someone? Given that our businesses often have less than 10 full time equivalent employees ( FTEs), the loss of an employee or two can throw off the entire forgiveness equation.
Uncertainty inhibits planning
There is too much uncertainty around the end of the mandatory shut down, particularly in NYC and even more so within our industry. What if we are not permitted to re-open by 6/30/20 because the curve hasn’t flattened yet? What if we can re-open, but are restricted by mandatory occupancy reductions? And when we are finally permitted to re-open entirely, what happens if customer behavior changes as people continue to shy away from public spaces and continue to embrace social distancing? How can we possibly plan staffing levels given this uncertainty?
How does 2 = 10?
(Oh, is that what banker's call a rounding error?)
The Treasury Department’s unilateral decision to move the loan term from 10 years originally envisioned by Congress to two years is disastrous. Under the current structure of the PPP, not only do we have to take on the likely risk that we won’t qualify for forgiveness, if we do not qualify, we would have to pay the loan back within 2 years, immediately following a disaster. This timeframe is not tenable for most small businesses, not to mention the fact that it’s unjust to saddle our businesses with any debt in this crisis. (Meanwhile, banks are getting paid a 5% fee on over half a trillion dollars for “processing” these loans automatically online.)
So what do we need? It's all about the rent (stupid). Let's talk about the economics.