The chief U.S. program offering assistance to restaurants and other small businesses suffering from the COVID-19 pandemic has run out of money, less than two weeks after the $349 billion program went into effect. It’s a development that could wreak havoc on cafes, bars, and other venues seeking immediate funds for rent, payroll, suppliers, and other obligations.
Applications for the so-called Paycheck Protection Program, which offers loans that convert into grants if used to keep staffers on payroll, are no longer being accepted by the Small Business Administration, the agency announced on its website, citing a “lapse in appropriations.”
As of yesterday morning, $301 billion in paycheck funds had already been allocated, per Bloomberg News.
Congress has been seeking to add funds to the program, but Republicans and Democrats remain deadlocked. Republicans have been trying to top off the program with an extra $250 billion in funds, while Democrats have asked for half that amount be channeled through community-based financial institutions serving women-, minority-, and family-owned businesses.
When the stimulus bill first passed, there was concern that larger restaurant groups would crowd out funding from smaller borrowers. Venues can generally apply as long as they do not employ more than 500 workers at a given location — a standard that excludes few restaurant groups outside of the largest caterers and mega-venues like Tao.
Indeed, Potbelly, the Chicago-based sandwich chain with over 470 locations, received a $10 million paycheck protection loan, according to filings with the Securities and Exchange Commission. Ruth’s Hospitality Group, which operates a chain of over 140 high-end steakhouses, also received two separate $10 million loans, per the SEC website.
Politico first published news of the Potbelly and Ruth’s loans. Both are publicly traded companies that withdrew the maximum amount allowed under the program.
Smaller food businesses nationwide have reported difficulty accessing the loan program, citing caps from lenders as well as the fact that they lack the established relationships with banks that larger venues have, according to a CBS News report.
Of the funds approved by April 13, over $115 billion have been for loans over $1 million, according to the SBA website, with the average loan size hovering at just under $240,000. Businesses in accommodations and food services have made up less than 10 percent of institutions receiving loans so far.