The historic relief bill pushed through Congress in late March has failed to spare the restaurant industry from devastation, raising the likelihood of more closings and layoffs unless key changes are made in the aid programs for small businesses, according to the National Restaurant Association.
The industry’s lead lobbying force sent a wish list of changes yesterday to congressional leaders from both parties. The communication came as lawmakers began considering an update to the $2.2 trillion relief package known as the CARES Act. A proposal to add $250 billion in funding for a key provision, the $349 billion Payroll Protection Program (PPP), quickly ran into trouble as Democrats and Republicans squared off over how additional relief funding should be allocated.
That increased funding is critical to the restaurant industry’s recovery efforts, the Association said in a letter to Speaker of the House Nancy Pelosi, Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer and House Republican Leader Kevin McCarthy.
“However, equally important is the need to address the limitations of the program that do not recognize the unique and evolving challenges of the restaurant business cycle and our path to recovery,” wrote Sean Kennedy, the Association’s EVP of public affairs.
Topping the list of changes requested by the Association: changing the employment criteria for forgiving PPP loans to restaurants. The program is intended to keep workers employed during the COVID-19 crisis. Toward that end, borrowers have to spend at least 75% of their loans on payroll if they want to be exempted from repaying what they borrowed.
That measure is impractical for restaurants because they have no need to rehire a staff when restaurants are limited to takeout and delivery, as they are in at least 29 states, the Association said. It argued in the Kennedy letter that loans should be forgiven if a restaurant spends at least 50% of the borrowed amount on labor.
Similarly, the Association asked congressional leaders to reconsider the amount of time that restaurants and other small businesses are afforded to use their loan amounts. The CARES Act currently indicates that the funds should be spent within eight weeks of a loan being granted. That time is insufficient for a restaurant to restaff and otherwise return to full operation, the Association argued. It suggested that a 90-day window for using the money would be more appropriate, and suggested the loans be offered through December 2020 because dining rooms may not be permitted to reopen for months.
The Association also asked that the terms of the loans be extended to 10 years, as originally proposed in Congress. The maturity date ultimately set in the CARES Act was two years. And payroll taxes due from restaurants in 2020 should be deferred for at least two years, the Association contended.
It asked that additional funds be made available to the industry by tweaking the criteria for two other aid programs covered in the CARES Act. Some restaurateurs may be ineligible for Economic Injury Disaster Loans because they are unable during the current economic crisis to personally guarantee repayment of their loans or provide adequate collateral. Those criteria should be waived, and operators should be permitted to request a second Economic Injury loan if the crisis should continue, the Association argued.
It also proposed doubling the CARES Act tax credit on payroll costs to $20,000 per employee, and the ability to claim the credit against payroll taxes that have already been deposited, thereby providing more cash on hand. In addition, the Association said, the break should be extended to businesses that have employees working in a limited capacity.
“The severity of this pandemic has made it clear that restaurants will remain closed—or severely curtailed in service—for far longer than originally anticipated,” Kennedy wrote. “Once ‘normal’ operations resume, virtually every restaurant in this country, from the favorite diner to the local icon, will be a virtual startup in desperate need of cash.”
He did not speculate as to when those normal conditions may return.