PPP and the Road to Recovery for Restaurants

This article was written with contributions from an interview with Caroline Galzin, Co-Owner of Nicky’s Nashville, and Marcia Masulla, Owner of Roar Nashville. Caroline and Marcia are both part of the leadership team at Tennessee’s Action for Hospitality.

The funds for the second installment of the Payroll Protection Program (PPP) as part of COVID-19 relief is now officially open. With nearly $285 Billion set aside for small businesses the race is on to secure funding.

However, many small business owners like Caroline Galzin of Nicky’s Nashville and Marcia Masulla of Roar Nashville acknowledge that this is only one step down the long road to recovery.

Before previewing that journey, here is a quick overview of the key elements to PPP, specifically as it pertains to the hospitality sector:

  • ~$285 Billion in total available loans (for all small businesses, not just hospitality)

  • In order to qualify, a company cannot be publicly traded and must have fewer than 300 employees

  • In order to qualify, a company must prove a 25% or greater loss in revenue during any quarter in 2020 compared to 2019

  • Restaurants & bars may apply for up to 3.5X payroll expenses, more than 2.5X for most other industries

  • Money can be used for some supplies, software expense and PPE. Examples would be Door Dash fees or plexiglass dividers

  • Businesses who have not yet received forgiveness or have not yet paid back their first PPP loan can still apply and qualify for a second PPP loan

For further reading on the details of PPP, this page on Lendio provides a great overview.

Obtaining a PPP Loan

During the first round of PPP a lot of small businesses were forced to compete with “small” businesses that were not small at all. Publicly traded restaurant brands like J. Alexander and Union Square Hospitality (Shake Shack) received funding.

Marcia noted that banks were financially incentivized to provide larger loans, which caused many small businesses to miss out on PPP. Large companies were called on by banks and offered funding, while small businesses had to apply and wait in line. “It was a clusterfuck, and you can quote me on that,” said Marcia in reference to the application process for the first installment of PPP.

Small businesses can apply for a PPP loan at any participating financial institution. According to Marcia, “Some participating banks from the first round may not participate in the second round, but I think the fintechs are going to come in and really own that share.”

Marcia also noted that fintech companies like Square, PayPal, Kabbage and Lendio stepped up in a big way during the first round of PPP for small businesses.

Both Caroline and Marcia suggest applying with both your traditional bank and a fintech, if you can. “Diversify your PPP applications, it doesn’t hurt you,” said Marcia.

Fintech lending platforms were built on approving loans quickly & digitally. Because of this they often can fund loans much faster than traditional banks or credit unions. For many small businesses, getting funded can be the difference between shutting the doors for good and living to fight another day.

COVID-19 Vaccinations

Even once that money does come in there is still a long road ahead. When asked what the most important thing the hospitality industry needs to survive, Caroline was quick to answer: “Vaccines.”

In Tennessee, the distribution of the COVID-19 vaccines is not following the recommended CDC guidelines. Rather than designating food service workers as tier 1C, meaning they would be eligible for vaccinations sometime this Spring after medical workers and first responders, they have been moved towards the back of the vaccination priority list in Phase 3. Under the current distribution plan the industry would be lucky if they receive full inoculation until late 2021 or early 2022, according to Caroline.

Vaccinations for food service workers would not only protect employees and their guests, but also instill confidence in the general public that it is safe to eat in restaurants again. In-house dining has been decimated. Prior to 2020 in-house dining made-up roughly 85% of industry sales.

Industry Worker Rent & Mortgage Relief

While the hospitality industry waits for their turn to receive the COVID-19 vaccination, even with the aid of programs like PPP, getting everyone back to work will take a while.

Both Caroline and Marcia are part of the leadership team at Tennessee’s Action for Hospitality fighting for workers who have suffered a loss of income. The group is raising money to provide rent & mortgage assistance grants of up to $1,000 for workers who plan to return to the hospitality industry when the public health crisis is over.

During the non-profit’s first grant application window, they received over 600 applications. While individual applications are currently closed, small businesses can still pre-qualify their employees for when individual applications open again.

Hospitality, as the name implies, is an industry built on providing great service. Helping the talented workers who are currently out of work will allow with the industry to recover more quickly.

Embracing Diversity

But in order for Nashville’s vibrant culinary scene to fully recover from the shock waves of COVID-19, it is important that the city continue to embrace what has made it unique: diversity.

The current crisis has only extrapolated the many underlying challenges and biases minority-owned and women-owned businesses have faced long before the coronavirus.

PPP has a lot of caveats, and resources to assist small business owners navigate the program are insufficient or completely absent in many minority communities.

Women owned businesses make up 40% of the small businesses in America. However, only 5% of the first round PPP loans went to women-owned businesses, according to data from 19thnews.org. And during the first round of PPP, Black women-owned businesses received only 0.5% of the total loans, according to accountable.us.

Marcia and Caroline, both women business owners, shared their frustrations with the biases they and other women continue to face when dealing with financial institutions.

“There needs to be a focus, a real commitment, there need to be dollars and tools for underrepresented communities within the hospitality sector”, said Marcia.

PPP is a step in the right direction down the road to recovery for restaurants but that road will be long and bumpy. It will take all of Nashville working together & supporting each other. Putting differences aside, rolling-up sleeves, working hard and refusing to give up the fight until COVID-19 is behind us and every single business is back on track with aspirations for a brighter future.