What to do with a Paycheck Protection Program loan


NEW YORK, NEW YORK – JULY 30: Alan Rosen visits the Build Brunch to discuss the Junior’s Restaurant & Bakery at the Build Studio on July 30, 2019 in New York City. (Photo by Gary Gershoff / Getty Images)

Gary Gershoff

Small business owners who got a $ 349 billion paycheck protection program forgivable loan now have to decide what to do with their money.

Some have very different answers.

Robert Miller uses 85-90% of the funding to rehire workers at his three Pittsburgh-area restaurants, with the remainder going towards certain business expenses like rent and utilities.

Miller, who employed 60 workers before the coronavirus pandemic, has put nearly 50 on leave since mid-March as business has fallen dramatically.

His three loans – $ 60,000, $ 75,000 and $ 80,000, one for each restaurant – will allow him to rehire full-wage workers and provide raises to those (such as cooks, cleaning staff and delivery men). ) who worked throughout the pandemic.

Miller also plans to bring several currently inactive workers back to restaurants for one-off projects such as cleaning the basement and landscaping the property.

Wasted money?

Alan Rosen, owner of Junior’s Cheesecake, which has four restaurants in the New York tri-state area, takes a different approach.

He obtained loan approval for each of his restaurants, for a total of $ 5.5 million. (He’s still waiting for a loan to be funded.)

Rosen, who has laid off 650 of her 850 workers due to the pandemic, does not plan to spend the money for several weeks or months.

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Instead, it will keep its workers on leave (and, hopefully, collect unemployment benefits). He continues to pay their medical benefits.

He keeps the loans as an emergency stash until the business can reopen permanently – which he says is in the spirit of PPP loans to help ensure the long-term viability of small businesses.

“If we are to do it smart, we have to wait until people feel comfortable with this medical crisis to sit side by side,” Rosen told CNBC.

“Until then, in my opinion it would be wasted money to start spending it,” he said. “We have to wait until we have a very clear path to success.”

The dichotomy highlights the tough – and potentially unpopular – decisions business owners face as they weigh how best to use their funding during the coronavirus crisis.

Those who received money from the initial funding cycle of the Paycheck Protection Program, overseen by the Small Business Administration, are among the lucky few.

Three-quarters of small businesses have applied for forgivable loans, according to the National Federation of Independent Businesses. About 80% of applicants have not had their loan processed or funded.

Loans can be made up to $ 10 million to businesses with 500 or fewer employees.

I don’t know if anyone knows what is right.

Robert miller

owner of three restaurants in the Pittsburgh area

To be fully forgiven, 75% of the loan amount must be used for wage costs and companies must rehire any workers on leave or laid off, according to Treasury Department guidelines.

That’s the approach Miller, owner of Sidelines Bar and Grill, Sidelines Beer House, and The Fire Side Public House, has taken.

“People are very grateful and it’s encouraging,” he said of his workers’ reaction.

“I don’t know if it’s fair,” he said of his approach. “I don’t know if anyone knows what is right.”

The puzzle of unemployment

Some workers, like waiters and bartenders, choose to stay on leave and collect unemployment benefits, which were significantly expanded by the $ 2.2 trillion coronavirus relief program enacted last month. This law also created the Paycheck Protection Program.

These workers decided they could earn more by remaining unemployed than receiving their previous salary, Miller said.

According to experts, workers who are offered a job again but do not take it, however, may not be able to receive unemployment benefits.

There are other potentially unfavorable factors in choosing to remain unemployed, such as the reduction in social security checks upon retirement (due to a period of non-payment to the system) and a potentially more difficult period to find a job. upon re-entry into the labor pool, said Julia. Rosner, employment lawyer at Legal Services NYC.

Miller is uncertain whether the people who choose to remain unemployed will ultimately mean that his loan cannot be canceled.

“I’ll just hope I do the right thing in the spirit of the way [the PPP] was created, “he said.” And hope for the best. “

Rosen would use about three-quarters of his loans for salary costs and the rest for business expenses if he were to ultimately use the funds, he said.

The main focus of its fund-holding strategy, for now, is to keep the 70-year-old family business afloat.

“I could take people off unemployment insurance today, not have the option to reopen our business and run out of funds in two and a half months,” he said. “Yes, that’s an option.”

“[But] I have an obligation to make sure this business continues for the next 70 years. “

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