Miami businesses fear they’ll miss out on latest federal money: ‘This is our only shot’
Steve Simon will do something this week that he and thousands of other business owners long took for granted. He’s cutting the first payroll checks to his employees in more than a month, thanks to emergency funds from the federal government.
“This is our only shot at being able to survive,” Simon said. “I feel bad for everybody that hasn’t received it.”
The owner of the South Miami Yumbrella food hall, Kendall restaurant Killer Melts and a food-truck event company, Simon feels like he won the lottery. He applied for three of the new forgivable federal government loans and received $116,000 last week via two of them, including the fast-depleted Paycheck Protection Program that should soon be replenished. He’s still waiting for his big request of $230,000.
The $349 billion program Congress created in late March to help small businesses stay afloat saw funds evaporate in 13 days, partly because large, publicly traded companies drained the loans.
The second round of PPP funding, reached as part of a nearly $500 billion bipartisan deal to also send money to state governments and hospital systems, cleared the Senate Tuesday night and is expected to move through the House of Representatives and to President Donald Trump’s desk later this week.
It provides about $320 billion in funds for the PPP, which has proved both popular and controversial. The new legislation requires $60 billion earmarked to small banks. Those institutions are likely better equipped to reach the smallest businesses, especially in underserved areas.
Restaurants, hospitality left out
Restaurants in general have not fared well in the stimulus efforts.
“To date, less than 9 percent of the loans approved have gone to the hospitality industry, and even fewer to independent restaurants,” the 500,000-member Independent Restaurant Coalition said in a statement Tuesday. The coalition had urged changes to the PPP, but those alterations were not included. “For the small groups that did receive funding, they won’t be able to keep their employees working after that cash runs out.”
Statistics say as much.
Nearly 60 percent of the jobs lost in March were in restaurants and bars, according to the U.S. Labor Department’s Bureau of Labor and Statistics. Yet only a sliver — less than 9 percent — of the first batch of federal forgivable loans went to the hospitality industry. Construction companies took home the lion’s share of federal dollars.
The association for chefs and small restaurants wanted a provision that would allow them to tap the loan upon reopening. Under the PPP, they must use most of the money now to cover existing payroll expenses for an eight-week period, with the goal of keeping employees off unemployment benefits.
But with the economy expected to reopen in phases, smaller restaurants think the structure likely won’t allow them to remain open.
“Restaurants are cash flow businesses, and until they can generate revenue they’ll still have a hard time maintaining payroll whenever they reopen,” the group said.
Simon is in that boat. After attending three internet town hall meetings, including one with Florida Sen. Marco Rubio, who helped create the PPP, he questions the requirement that restaurants rehire a majority of their staff by June 30 — particularly if it isn’t safe to reopen.
“After that, what do we do? Are we going to have to lay off everybody again?” What’s really going to happen?” said Simon, who has 78 workers across his three firms. “If we’re not open and running, are they going to have a second round of loans?”
Having a recognizable name hasn’t helped some local restaurants. Star chef Michelle Bernstein, who owns Little Havana’s Cafe La Trova, was shut out when applying through Wells Fargo and is hoping for better luck with SunTrust Bank. James Beard award winner Chef Michael Schwartz switched his loan application from Wells Fargo to Ocean Bank, hoping for help after having to slash the staff at his nine restaurants from 460 to just six.
“We’ve applied and await availability of the funds. It’s such a complex puzzle,” Schwartz wrote via text.
Cable news company CNBC reported Tuesday, citing research by investment bank Morgan Stanley, that some largely publicly traded restaurants and their franchisees won big sums under the PPP. This included the Potbelly sandwich chain, Ruth’s Chris Steakhouses, Shake Shack and J. Alexander’s Holdings. (Shake Shack has issued a statement saying it will return the funds.)
These big corporate chains aren’t what comes to mind when thinking about small businesses. And a survey released this week by online lender Lending Tree found that just 5 percent of small business owners it surveyed had received PPP funds, although 60 percent of the 1,260 firms surveyed had applied.
Big banks, small results
The struggle to get government funds and remain afloat is not limited to restaurants.
Terrence Dancykier owns two assisted living facilities in Broward County — Victoria Retirement Home and Victoria Gardens Home — with 20 workers watching over about 60 seniors between the two facilities. Through his lender BBB Trust, he applied for a PPP loan and nearly two weeks later still has no idea where things stand.
“The communication has not been that great,” said Dancykier, who has been checking his portal on the Small Business Administration website and his emails daily.
When he writes to the SBA, which has processed years worth of loans in just weeks, he gets an automated reply that warns to expect a longer than usual response time.
“There is such a mad rush for this, and nobody knows what you need to get your application approved,” he said, hoping to ensure he can keep his staff intact.
The Miami Herald’s tip line has been flooded with business owners waiting for PPP monies or frustrated that they were shut out of the first round. Among them was Stephen Pawley, who was trying to get PPP funds as a sole proprietor of a business selling annuities.
Pawley lives in Parrish, near Bradenton in Manatee County, and earns about $5,000 a month in commissions selling annuities. In normal times, he’d visit prospective clients in their home, working off of leads he’d purchased. That isn’t doable for the foreseeable future.
He doesn’t want to spend his savings on new leads; he may need the money to live on, he said.
Working with a smaller lender, First Home Bank in St. Petersburg, Pawley was able to apply but was later asked to provide a 2019 tax return, presumably to prove what he pays himself. Because of the Trump administration’s decision to push the filing deadline to July, he hadn’t filed yet and rushed this week to do so.
The annuities broker also applied for federal funds set aside for the self-employed that are routed through the dysfunctional website of Florida’s Reemployment Assistance Program. Hundreds of thousands of Floridians who were laid off have been unable to file or receive unemployment benefits and those trying to get the federal funds must first create an account and pin number, far easier said than done.
Hearing the horror stories, Pawley filed for the federal benefits by mail to Tallahassee more than two weeks ago, and is also awaiting an answer there.
“To have gotten into a paper situation, it tells you how bad it was,” he said. “It’s not even fair to call it a nightmare. It’s something 10 times worse than a nightmare.”
Miami Herald staff writer Rob Wile contributed to this report.
This story was originally published April 23, 2020 at 6:00 AM.
