East Bay restaurant owners say the new stimulus package will help, but only if PPP loans are forgiven

Even if the new COVID-19 relief bill is signed into law, some restaurateurs say a new round of loans will only sustain them for a few more months.

Poulet in North Berkeley was able to stay in business, despite closing from March through August, thanks to the first round of Paycheck Protection Program loans. Photo: Sarah Han

Restaurants and food suppliers in the Bay Area are grappling with a new round of strict stay-at-home orders that ban on-site dining service during a bleak winter with skyrocketing coronavirus cases. The federal government is finally starting to take action. After months of political gridlock, on Monday night Congress passed a $900 billion COVID-19 relief bill. In addition to supplying eligible Americans with $600 stimulus checks and unemployed workers with $1,200 per month in aid, the bill directs $284 billion to restart the Paycheck Protection Program (PPP) through March. Although passed by Congress, the fate of the stimulus package remains unclear; on Tuesday President Trump threatened to veto the bill. But even if the stimulus package is signed into law, some local restaurant owners are uncertain it will be enough to keep their businesses open for more than a few months.

For Maria Alderete, the owner of Luka’s Taproom and Lounge in Oakland, getting her hands on a PPP business loan in spring, with the $2.2 trillion CARES Act that passed in March, was a boon for her struggling restaurant at a time of acute crisis, but also an emotional roller coaster in its own right.

The initial stress of not knowing if or when her bank would service her loan physically increased her blood pressure, she said. Now that she has used up that money, Alderete is again anxious, but this time about applying for loan forgiveness, an aspect of the program she meticulously planned to be eligible for by ensuring 60% of her PPP money went to payroll. Her bank has said she is not yet eligible to apply for loan forgiveness and has not indicated when she will be.

“There’s still a lot of uncertainly in my mind about whether or not any of it is going to be forgiven,” Alderete said. “I’m trying to learn as much as I can while still trying to run a business. It’s overwhelming.”


Stimulus package gives more loans, but not grants

If the latest relief package passes, the reemergence of PPP could give restaurants the boost they need to sustain business until a vaccine becomes widely available, but many restaurant owners say that unless the last round of PPP loans are forgiven, they aren’t interested in taking on another loan. The stimulus package allows for any food-service business with fewer than 300 employees that can demonstrate a 25% drop in sales from a year earlier in at least one quarter to eligible for PPP loans amounting to up to 3 1/2 times its average monthly payroll. Businesses can use the funds within 8 to 24 weeks and, as with the last round of PPP, businesses must spend 60% of the loan on payroll to be eligible for loan forgiveness.

Poulet owner-manager Jesse Savell says he might not apply for another round of PPP through a new stimulus package unless his initial loan is forgiven. Photo: Janis Mara

Jesse Savell, an owner of Poulet on Shattuck Avenue in North Berkeley, applied for a PPP loan to help his restaurant reopen after he shuttered its doors from March until August so that his employees could collect unemployment and stay safe at home.

“That money lasted two or three months and then we’re back to where we were, but it was a huge part in us being able to get back to business,” he said. “I’m not going to say we’re incredibly successful right now, but we’re doing okay.”

Savell says he was able to retain his full-time staff members thanks to the PPP loan he received. That said, he will only consider applying for another round of PPP money if and when his initial loan is forgiven.

“We haven’t even gotten to the point where you apply for loan forgiveness, so that could be a whole can of worms,” he said. “Then my opinion on the PPP loan could definitely change.”

Vi Nguyen, owner of Vanessa’s Bistro in Berkeley, was trying to find another loan to keep her business afloat prior to the new stimulus deal. The first PPP loan she received in the spring helped keep Vanessa’s open through June, when she was able to reopen the restaurant’s patio for outdoor dining and enjoyed two months of profitable business. Now, however, she’s four months behind on rent and other bills.

“I’m hoping that it’s 100% forgivable like the last one because I distributed everything correctly,” she said. “I can’t close down now after 14 years. This is all I have.”

Vi Nguyen at Vanessa's Bistro.
Vi Nguyen, owner of 14-year-old Vanessa’s Bistro on Solano Avenue in Berkeley, is also waiting for loan forgiveness on the PPP loan she received earlier this year. Photo: Anna Mindess

According to the National Restaurant Association, in 2019, restaurant and foodservice jobs made up 11% of employment in California. Because restaurants are linked to so many people’s livelihoods across the nation, the association lobbied for congress to give restaurants direct financial assistance, also known as bailout money, rather than just loans from the federal government in the stimulus package, in a similar fashion to the airline and entertainment industries. The new stimulus package does not include bailout relief for restaurants that the industry had hoped for.

“We have an industry that really has a very large employment base of people who by no fault of their own are unable to work,” Alderete said. “This is also a workforce that’s very diverse. I just don’t understand why the industry in general has been left out of specific aid given how large of an impact there has been on our industry.”

According to the Independent Restaurant Association, a coalition of restaurant and bar owners across the country, food and drinking establishments lost over 2.1 million jobs since the start of the pandemic, more than any other industry. On Sunday, the association slammed the stimulus bill for failing to provide direct payments to restaurants: “The small changes to PPP funding for independent restaurants will buy time for Congress to negotiate a more robust plan, and we are grateful to many champions in the House and Senate who fought for those changes. But make no mistake: independent restaurants and bars will continue to close without additional relief this winter, leaving millions more out of work.”

An alternative type of aid that is being considered in the legislative branch is the $120 billion RESTAURANTS Act, a relief package that would funnel grants to restaurants, bars, food trucks and small farms to close the gap between 2019 and 2020 revenues. Some hope the legislation, which passed the House in October, could pass in a Biden administration.

What’s clear to everyone, though, is that the current reinvigoration of PPP is helpful, but the food industry is seriously struggling nine months into the pandemic and will need a lot of sustained financial assistance and widespread vaccinations to climb back to previous heights.

Loans are a stop gap, but more money will be needed

Paul Johnson, the owner of Monterey Fish Market on Hopkins Street in Berkeley, lost 80% of his business in March, mostly due to plummeting restaurant orders. Since then, Johnson has used PPP to prop up his business, but he also has seen the broader effect of the stimulus measure for food suppliers like him. As restaurants get more money and can serve people, they place orders for food items, like seafood, again.

Consequently, he is certainly glad that other businesses will soon get a boost from a new round of PPP, and Johnson said he may even participate in the program again himself. He doesn’t think, however, it will be enough to tide over the food industry as a whole until vaccines become more prevalent.

“Truthfully, I think we’re going to need another round,” he said. “There’s people starving. There’s people who, if this hadn’t passed, would be on the street.”

Alderete agrees more action is needed. “Our bank account is declining. Everyone’s bank account is declining. There’s no profit right now, there’s only loss.”