‘Hung us out to dry.’ Hilton Head restaurants frustrated with federal relief funding
This story was updated on April 9, 2020.
One of the major parts of the CARES Act, the $2.2 trillion federal relief package for economic victims of coronavirus, is a forgivable loan meant to serve as a lifeline for businesses and their employees.
Members of the restaurant industry on Hilton Head Island and in the U.S. at large are crying foul, however, saying the $350 billion Payroll Protection Program has a host of problems and overlooks some of the concerns of restaurant owners.
“The federal and state government have hung us out to dry,” said Clayton Rollison, owner of the Lucky Rooster restaurants and a board member of the S.C. Restaurant and Lodging Association.
The PPP offers federally-backed loans through the Small Business Administration that can be forgiven if the business keeps employees on its payroll for eight weeks and spends 75 percent of the loan on payroll. Additionally, worker compensation must be comparable to pre-coronavirus levels.
Alan Wolf, president of the Southeastern Entertainment Restaurant Group (SERG), was forced to furlough 800 restaurant employees after paying partial paychecks for two weeks. Though he has applied for the PPP under CARES, Wolf said “forcing people to get back on payroll” would make owners furlough their workers again after eight weeks because restaurants may not be up and running by that time.
Once the loan hits, “the clock starts ticking and you have to spend that money on labor and rent,” said Andrew Carmines, owner of Hudson’s Seafood restaurant. He said restaurants do not want to lose the forgiveness of the loan, which would put them in worse financial straits “because we don’t know the timeline.”
Carmines furloughed 80 of his workers last month, though the eatery still runs a takeout kitchen with a smaller staff.
“I am concerned if businesses do not fully understand the loan they will be digging a deeper hole for there restaurants and maybe one they can’t climb out of,” said Brendan Reilley, owner of Coastal Restaurants and Bars (CRAB), which runs Crazy Crab in Sea Pines and on Jarvis Creek, Reilley’s Grill and Bar, Aunt Chilada’s, Fishcamp on Hilton Head and in Port Royal and others.
With the second largest restaurant group on the island, Reilley was forced to layoff nearly 600 workers. CRAB paid employees a week’s worth of pay before placing them on leave: “$450,000 in payroll with no income,” Reilley said.
He said they have applied for PPP at every restaurant but have not received any funding.
“The PPP was not designed for restaurants and has many holes in it when you are looking at meeting the requirements of forgiveness,” said Reilley.
How big is the pot?
While banks only began accepting PPP loan applications on Friday, there is already a sense that the $350 billion might not be enough based on the number of U.S. businesses seeking relief.
The Treasury Department is already asking Congress for an additional $250 billion for the fund.
Some businesses are directing their anger not at the federal goverment, but at the banks who actually make the loans. Who receives one of the SBA’s forgiveable loans is decided by banks, who are swamped with applications.
Gregg White, district director of the SBA in South Carolina, acknowledges “there is a large demand” and said the agency is unable to tell banks who they can and cannot make loans to.
“The banks are private entities. SBA is not dictating who they can lend to,” said White. “All we can offer is a 100% guaranteed loan.”
White said the current backlog for getting the money in the pockets of businesses “is happening at the bank end,” though he acknowledges how quickly - and recently- this program has been rolled out.
“We don’t know when that funding is going to come. We don’t even know if it will,” said Carmines, though he cautioned it is still early to worry about the program’s flaws.
A sledgehammer blow
A group called the Independent Restaurant Coalition sent a letter to Congress on Monday asking for specific changes to the PPP to better help restaurants, including provisions such as extending the eight-week timeframe to three months, increasing the total amount of PPP funding available and increasing loan repayment time.
On Hilton Head Island, where the restaurant industry makes up a significant amount of Beaufort County’s $1.48 billion in tourist spending, the effects of the PPP could be wide-reaching.
Rollison said all the changing information about the program has been dizzying, but the need is clear.
“The truth is our industry was hit over the head with a sledgehammer,” he said.
One of his Lucky Rooster franchises has already been quickly approved for PPP but, like many businesses, is waiting for that money to arrive.
“The reality is none of us are going know anything until we get our loans,” said Rollison.
This story was originally published April 8, 2020 at 6:03 PM.
