Asia Mei celebrated the five-year anniversary of her South Boston restaurant, Moonshine 152, for a whole week in February. Customers brought flowers and bottles of sake, regulars arrived in drag, and Mei reveled in the feeling that her little restaurant, where she often cooked solo in the back, had finally hit its stride.
One month later, on the morning of St. Patrick’s Day, Mei spent three hours laying off her roughly 25 employees, at least for a while, because the coronavirus outbreak made operating impossible.
Now, she and restaurant owners around the country are navigating the complex process of obtaining government loans that many fear won’t be enough to buoy their industry.
Several weeks ago, Congress enacted a $2 trillion relief package that offered small businesses large, potentially forgivable loans aimed primarily at buttressing their payrolls. But the halting rollout of those loans — as well as some of their specific provisions — have made them a paltry balm for the enormity of the crisis that faces restaurants. They were among the first businesses to close and now face deep uncertainty over what their future will look like in a world where people may be too scared, or not allowed, to dine out, and for a long time.
“I wonder if we’ll be able to reopen at all. I wonder if we’ll be able to stay open, and under what conditions,” Mei said. “Everyone’s going to realize that the businesses that meant so much to them before aren’t going to be there.”
Restaurants are at least an $800 billion industry nationally, according to industry groups, and the losses so far from the coronavirus are staggering. One industry survey estimated 8 million jobs have disappeared around the country and projected $80 billion in lost revenue in March and April. In Massachusetts alone, 211,000 jobs have already been vaporized, and $2.3 billion could be lost in March and April, according to the Massachusetts Restaurant Association.
Owners of sandwich shops and high-end icons alike say the prospect of long-term damage is all but certain, and they don’t think the newest round of funding for small-business loans is going to fix it. As Massachusetts restaurateurs advocate for state and local help, a national push is on for industry-specific relief, or at least changes in the current rescue package that owners say would make it more useful.
“The bottom line is, that program was specifically structured and restricted to preserve payrolls,” said Tracy Loh, a fellow at the Brookings Institution. “This is more existential for restaurants. This is about whether the business is going to exist after this is over.”
In interviews, a dozen Massachusetts restaurant owners described the scramble to apply for the loans — and the wait for them to come through — in an industry turned upside down. But they were also reckoning with the question of if the loans would actually help with the unique challenges faced by businesses that, by definition, depend on people being willing and allowed to share space.
Union Square Donuts has not made a doughnut since March 17. Hector Piña, the owner of Merengue in Roxbury, a staple of his neighborhood for 25 years, had to borrow money to make his last payroll as things shut down, and he has no idea when business can look normal again.
Chris Coombs, whose restaurants include Deuxave and Boston Chops, has laid off 237 employees and now goes into his restaurants mainly to do maintenance to keep the water flowing, like flushing toilets.
“Your utilities don’t stop, your taxes don’t stop, your rent doesn’t stop,” Coombs said. “Aside from people not having the money to go out to eat, when will it be safe?”
They and other restaurant owners have applied for loans through the new Paycheck Protection Program, whose initial $349 billion ran out in less than two weeks. Congress last week approved an additional $310 billion, and new loans were available starting Monday. The program initially brought hope to an industry that was among the first to be devastated in early March.
“I think we all saw the palm trees when this was announced, and I think we’re all finding out this was a mirage,” said Jeff Gates, a partner at Aquitaine Group.
Small businesses were able to apply for loans 2½ times their monthly payroll. Those loans are fully forgivable under several conditions: They must be used within about eight weeks, and businesses must maintain their staffs, limit reductions to their payroll levels, and rehire workers by the end of June. A rule from the Small Business Administration says no more than 25 percent of the forgivable amount can be spent on non-payroll costs. If borrowers choose not to use the loan to cover forgivable costs, they have to pay it back at a 1 percent interest rate in two years.
Those rules have presented restaurant owners with a dilemma. Should they use the loans to return their staff right away — thus ensuring the loan will be forgiven — even if it means bringing their employees back when there is very little work to do, or when it might even be dangerous to do so? Owners facing huge revenue losses, unpaid bills, high rents, and an uncertain future say a loan that incentivizes them to bring back their whole staff now feels like a mismatch.
“Collectively, we don’t understand why we would use the money when we’re not in business," said Kathy Sidell, whose restaurants include Stephanie’s on Newbury and Saltie Girl. "I’d love all my people to get paid — I’d like nothing more than that to happen — but practically it doesn’t make a whole lot of sense.”
Some owners said the details of what, exactly, will be forgivable are still not clear. And some say that because of these issues, they are likely to let the loan money sit in their bank accounts, where it is of no help to the economy at all.
“Currently today, with the guidelines of the Small Business Administration, the loan is useless,” said Eric Papachristos, who has eight restaurants in the Boston area, including Trade and Saloniki Greek. “We still don’t have a safety net.”
The loans were intended to keep employees paid, and there is an argument to be made that owners who want loan forgiveness should use the money to maintain their relationships with their employees, even if they are essentially paying them to stay home. A paycheck could be a godsend for laid-off immigrants who are unable to get unemployment benefits, or for those who want a smooth transition back to work when lockdown orders are lifted.
But with reopening dates still far off in most states, industry groups like the Independent Restaurant Coalition are calling for the eight-week clock not to start at least until restaurants are allowed to open back up.
Some restaurateurs — particularly those who have managed to build more-robust takeout operations — said the rescue money would help tide them over, even if they ultimately use it as a low-cost loan they have to repay.
“That in itself is basically better than any business loan you could have ever gotten,” said Dave Becker, who owns three restaurants near Boston, including Sweet Basil in Needham. “That’s a dream come true anyway.”
But others, like Paul Turano of Cook in Needham and Newton, are reluctant to take on loans at such an uncertain time. “I can only use a fraction of this money,” he said, “because I can’t let it turn into debt.”
Mei, of Moonshine 152 in South Boston, is hoping the city and state can step in to help restaurants get rent relief and other assistance as they consider what their businesses can look like in a changing world.
“It’s going to take more than just what comes from the stimulus package to get them there,” she said.