How the New COVID-19 Stimulus Bill Affects Restaurants

Since the first COVID-19 stimulus bill was passed last spring, small businesses all around the U.S. have waited with bated breath for the next round of relief packages to save them from permanent closure. Unfortunately for many now-defunct businesses, help never came—until now.

In particular, restaurants have been affected by this pandemic’s ups and downs, with mass closures and partial capacity seating causing a $130B loss in revenue from 2019. Congress has discussed a new stimulus bill for a while; many in the hospitality industry were pushing to tackle the Restaurants Act, which would have designated $120B of the relief to small restaurants and bars. To guarantee it went to the right people, the Act would have stipulated that it only applies to restaurants with fewer than twenty locations, with priority given to minority- and women-owned establishments.

Congress ultimately didn’t include the Restaurants Act in the bill. However, both House Speaker Nancy Pelosi and Senate Minority Leader Charles Schumer announced late Sunday that they made critical changes to the $900B emergency relief package that passed in December. This included modifications to the Paycheck Protection Program targeted at independent restaurants.

Targeting Small Business

Lobbyists specifically pushed to right some of the wrongs with the first bill, which they felt sent funds to big businesses despite efforts to avoid just that. Many small restaurants didn’t receive the first round of PPP loans, so this time lawmakers specified that it would have to apply to businesses:

  • with 300 employees or fewer;
  • that experienced a 25% loss in revenue during at least one quarter of 2020 compared to 2019;
  • that aren’t publicly traded companies.

The program has also been extended through March 31st, allowing restaurants that received the first round of PPP loans to reapply. They also changed how they calculate the loan’s size, basically multiplying average payroll costs by a more significant factor. Now each restaurant receives a more generous amount of money to spend, with a maximum loan payout of $2M and still with the potential for some loans to be forgiven, providing recipients spend it appropriately.

All of this is designed to give the hospitality industry an extra boost because it’s more negatively impacted by the virus, thanks in large part to restrictions on dine-in seating all over the map.

More Flexibility

Restaurants will get more and more effective, funds and more options about how to spend them. Restaurants have to put 60% to payroll, but the remaining 40% can go to PPE, training, changes to safeguard guests against coronavirus, and perishable foods. The industry was explicitly concerned with the latter; part of why restaurants were hit harder than other small businesses is because even a two-week shutdown in the event of an onsite outbreak is enough to spoil their inventory.

Businesses covered by PPP will also receive a tax deduction at the end of the business year, so they don’t find themselves with a giant surprise bill. The other NRA and Independent Restaurant Coalition made sure to include this provision to protect restaurants in the second round of a relief bill that seeks to correct the first’s perceived mistakes.

| eatOS - Restaurant Management Made Simple April 23, 2021

A Brighter Future?

In many ways, restaurants are excited about the promised changes; however, many small business owners remain concerned. For example, some smaller restaurants are worried that the funds are being dispersed through banks, though some may not have the financial history or savings available to open an account. Banks big and small are ready to take on the challenge along with authorized credit unions.

Nonetheless, critics have concerns that even these most crucial changes won’t be enough to save the deep-rooted, coronavirus-related issues hurting the restaurant industry—but it is a start. It seems that with these new provisions, lawmakers are trying to find pragmatic solutions they can include in the emergency relief bill rather than putting it off even longer trying to create a full-fledged, long-term solution. This is the exact reason it’s been put off so long in the first place, and America’s restaurants need a bandaid now, even if it’s not the full-scale shakeup that would genuinely save the industry.

Restaurants all over the country are excited to see the emergency relief bill provide some help, but we’re all still looking toward the future to see if 2021 will bring the changes they hope for. Only time will tell if this bill provides relief.

Editor's Picks