Restaurant owner Qui Tran was quick to apply for a Paycheck Protection Program loan, but reluctant at first to spend the money. He said in April that the program’s strict rules amounted to “predatory lending by the government.”
Tran, who owns Mai Lee in Brentwood and Nudo House restaurants in St. Louis and Creve Coeur, is a happier borrower these days. After heavy lobbying by the restaurant industry, Congress relaxed the PPP’s loan forgiveness rules, giving firms more time to spend the money.
“It’s 10 times better now,” Tran said recently. “Restaurants are just beginning to open again, and it was hard to use the money the way they originally wanted you to use it.”
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To qualify for forgiveness, businesses were supposed to spend the money on qualified expenses within eight weeks, with 75% of the funds going to payroll. Now they have 24 weeks and can spend as little as 60% on payroll.
Tran’s eight-week deadline would have arrived this month and his restaurants, which are doing curbside business only, still have 10 of their 60 employees on furlough. With his dining rooms set to open in early July, he plans to bring everyone back soon and expects to have no trouble getting his PPP loans forgiven.
Mike Johnson, owner of the Victory Raceway go-kart track in Crestwood, also said the changes make his PPP loan more attractive.
“I think the government understood that they were giving us the money when we weren’t allowed to open,” Johnson said. “Now, the timeline for using it is much more in line with reality.”
Victory, which was forced to close when the coronavirus pandemic hit St. Louis in mid-March, plans to reopen Wednesday. Johnson paid five staffers for six weeks after he closed and brought them back June 1 to prepare for the reopening, but he’s not sure he would have qualified for forgiveness under the old PPP rules.
The congressional action has removed that worry, while allowing him to use more of the federal money to cover things like rent and utilities. Electricity alone costs $10,000 a month when the track is open, Johnson said.
Mark Hinkle, owner of the Olive + Oak and The Clover & The Bee restaurants in Webster Groves, is also grateful for the PPP’s new flexibility. “It certainly makes the money more usable now than what it was,” he said.
His restaurants currently are limited to curbside and patio service, but Hinkle expects to have his staff back to its pre-pandemic size of about 100 people within a month. Olive + Oak just moved to a new, larger location, and he plans to open a pizza and pasta restaurant in the old space.
Peter Boumgarden, professor of strategy and organization at Washington University’s Olin Business School, says the PPP “was relatively well designed on the front end, but there were some challenges.”
Here’s one measure of the new rules’ appeal: Boumgarden has talked to some business owners who returned their PPP money and now regret it. They chose a tax credit instead of the loan, but now the loan terms are more attractive, and they aren’t allowed to reapply.
Those who kept the money are happy with their decision, but some worry whether it will be enough. “Under PPP the next few months should be fine for us,” Hinkle said. “When that runs out, when rent and utilities and payroll are back on our shoulders completely, it may be difficult if our business is not back to normal.”
David Nicklaus • 314-340-8213 @dnickbiz on Twitter dnicklaus@post-dispatch.com