WATAUGA — Some small, locally owned restaurants in the High Country are concerned that the Coronavirus Aid, Relief and Economic Security Act, which was signed into law on Friday, March 27, by President Trump, will worsen their financial situations in the long run despite the relief it may immediately provide throughout April and May.
The CARES Act was formulated by the U.S. Senate and House of Representatives to offer financial support to both individuals and small businesses during the COVID-19 pandemic until Dec. 31, 2021.
According to an April 3 article by Forbes, “The centerpiece of the stimulus package ... is the Payroll Protection Program or the PPP. The hospitality industry had great hopes for this program because while the PPP is initially a loan, it can be converted into a grant. Restaurants desperately need cash grants, not more loan debt. But to obtain the full benefits of the PPP (i.e. a grant as opposed to a low-interest loan) a business’s employee headcount has to be approximately the same two months after the loan is originated, as it was before the pandemic hit.”
Vidalia Restaurant and Wine Bar co-owner Alyce Ratchford said that the Small Business Association and Paycheck Protection Program loans that are set to be provided could leave small restaurant businesses “digging out, financially” for years to come.
“The CARES Act,” Ratchford said, “should mean relief for many of us. Ideally, it should mean we can pay our rent and bills without losing our minds every time we look at our business bank account. It should mean that we can stop worrying about our employees and their wellbeing. But the truth of the matter is that right now it’s not going to be any of those things. It means more loans we’ll be responsible for down the road.”
Additionally, since the beginning of the pandemic and throughout the bill-drafting process, the terms that come along with SBA and PPP loans have changed multiple times, causing banks to dispose of previously submitted applications and delaying support for small businesses, according to media reports. There were also delays with the passing of the act regarding which businesses should be eligible for support.
According to the U.S. Department of Treasury, with a PPP loan, employers could receive a loan of up to $100,000 for each employee’s payroll costs, with a set 1 percent interest rate and payments due beginning eight weeks after the loan is distributed. However, the PPP loan could be converted into a grant, which does not require small business owners to pay the money back, under the condition that employers build staffing up to the same level it was at before the economic crisis. More details are available at https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses.
“Seventy-five percent (of PPP loans) is to be used for payroll, but you have to have your workforce numbers back to normal within eight weeks of receiving the money. How are we supposed to have 15 employees a day back on full payroll when we are only doing one-third of our business or might still be under restrictions for how we can operate?” Ratchford said.
“For us (at Vidalia), we’re literally applying for anything we can and keeping our fingers crossed that we qualify and receive something, but there’s really no guarantee,” Ratchford said.
Andy Long, co-owner and chef at Over Yonder Appalachian Kitchen in Valle Crucis, echoed many of Ratchford’s concerns and comments.
“Even when we are able to reopen, business will not be back to 100 percent right away. The worst thing that can happen is we rush to open too soon and sales are so bad we have to close forever,” Long said, noting that businesses will be required to start paying back the PPP or SBA loans before business traffic is back to normal.
Additionally, Long, who has been in the restaurant business for more than 25 years and owner of Over Yonder for six years, said that the CARES Act presents “some helpful ideas,” but the implementation of those ideas may prove to be extremely difficult for small business owners.
“I would have preferred to see the smallest operations given a chance to apply first, with options for incrementally larger companies given opportunities later. It’s pretty hard for an operator that had maybe 10 or 20 employees and now has maybe one or two to navigate new takeout and delivery procedures, handle your company’s online presence, check up on your laid-off staff to make sure they are okay and then have to navigate a seemingly impossible process of getting government aid,” Long said, adding that he’s been trying to receive aid since the end of March.
“The CARES Act also included money for an SBA loan to float small businesses, and the application states that if you would like a $10,000 advance on that loan you can get it in three days. I applied on March 30 and have heard nothing, and when I called yesterday (April 8) to check on my status, I was told they are too overwhelmed and I would have to be more patient,” said Long.
Lela Silver, co-owner of Storie Street Grille in Blowing Rock, which closed as a precaution against the COVID-19 virus, says she doesn’t think of small business as employing nearly 500 employees as the SBA defines it, but rather sees small businesses as employing “50 or less, maybe 100,” especially in regard to local businesses in the High Country.
“I think people with deeper pockets will benefit and small guys like us will be paying them back,” Silver said. “The loans are designed for areas that have more full-time employees and steady year-round cash flows.”
Ratchford also mentioned the seasonality of business in Boone, saying, “March and April are months where last season’s profits are nearly gone, if not gone already. Events like Appalachian State’s graduation, BANFF, Art in the Park and parades are the events that help us all pull through to the peak (profit) season. All of that is gone now, and we’ll start again even further in the hole when this ends.”
As for the lasting effects of the COVID-19 pandemic and resulting shutdowns on small businesses, and particularly restaurants, Silver said that owners could very well be at a precipice in the way their business runs.
“I foresee food shortages which will change our menus,” she said. “We have always tried to support local farms as much as we can, but (the changes to menus) will be more of a need than ever. I think people will want more distance between them and other diners, which affects small restaurants like mine and our seating capacity. We will have to be ever-changing until we see some calm from this storm.”
As for the new lack of community interaction and fellowship, Silver says that she’s excited for “guests to come in when it’s over and love us for the people we are and the food we enjoy serving them.”
“I miss them everyday,” she said.
The High Country community can support local businesses by ordering take-out or delivery, purchasing gift certificates, or simply checking in with restaurant owners and servers who may be struggling due to closures caused by the pandemic.
Long says that “the outpouring of support from our guests, family and friends has been truly humbling” thus far.