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For Restaurant Owners, Federal Stimulus Loans Are a Mixed Blessing at Best

Even restaurateurs who have received the loans say the terms are so confusing, they’re afraid to use the money

The now-closed Noodle Girl kiosk
The now-closed Noodle Girl kiosk
ASUC Student Union/Facebook

Like thousands of other small business owners, Hang Truong, who runs Noodle Girl, a Vietnamese food kiosk in the UC Berkeley student union, applied for a federal stimulus loan under the Paycheck Protection Program (PPP) when it was first announced in late March, and then again when the depleted fund was refilled two weeks ago.

Early last week, Truong — an alum of the La Cocina incubator program — was finally approved for her loan. But now she says the terms of the loan are so confusing, she’s unsure if she should even use the money. “I’m scared, and I don’t know how to use it yet,” she tells Eater SF.

In the Bay Area, Truong is hardly alone among restaurant owners who report feeling ambivalent about the PPP loans they’ve received, many from the second round of funding. When the program was first announced, it was cast as a potential lifeline for restaurants when shelter-in-place orders shut down dining rooms across the region. Because the loans can be forgiven if recipients meet certain criteria — including spending 75 percent of the money on payroll within eight weeks of receiving it — in theory, they provide a way for restaurants to pay their employees without accumulating additional debt.

The problem is that restaurants haven’t been given very clear instruction on the exact terms of loan forgiveness, and many owners find the prospect of rehiring nearly all of their staff an unviable prospect when dining rooms remain closed — an argument that Che Fico chef-owner David Nayfeld made in a recent editorial for Business Insider, explaining that, given the unlikelihood of him being to give his staff “1,200 hours a week of labor” anytime in the near future, he would probably return Che Fico’s stimulus loan.

Noodle Girl’s Hang Truong
Noodle Girl’s Hang Truong
Jenny Love

In Truong’s case, there simply isn’t much business she can do right now. Her Berkeley kiosk has been shut down since mid-March, when UC Berkeley sent its students home — she can’t even access the building. March and April have always been her busiest time for catering big events, but of course this year, all of those clients canceled. Without a storefront where she could open to do takeout, even if she wanted to, all she’s able to do right now is a limited amount of food delivery. To compound the problem, she says she was only granted about half of the $25,000 she requested.

Just a minor tweak to the terms of the loan, extending the deadline for using the money to something like six months, would make it much more useful to her, but “in eight weeks I don’t have enough jobs for my employees to do,” she says. In July, Truong plans to move her restaurant to a new location in Oakland — the old Tamarindo Antojeria space near Chinatown. She says she’d love to be able to wait to use the money then, but she’s also afraid that if she doesn’t take the loan now, she’ll have lost her one and only chance to get any kind of government relief. “You’re holding the money, but you don’t know what is the right way to spend, when is the right time to spend,” Truong says. “I don’t see very clear information.”

Even restaurant owners who are moving forward with their loans are doing so with great trepidation. For Fernay McPherson, another La Cocina alum who owns Minnie Bell’s Soul Movement in Emeryville, the stimulus loan she was approved for on May 4 means that starting next week, she’ll expand her fried chicken restaurant’s takeout program from a weekend-only operation to one that operates Thursday through Sunday, through the same online preorders system she’s used all along.

To expand her hours, she’ll try to bring back her three remaining furloughed employees — though two of them, she says, aren’t quite ready to return to work. That’s another challenge of the stimulus loan: Forgiveness depends on employees being willing to go back to work, even if they’re making more money through their unemployment benefits, or prefer to stay home due to health concerns.

Regarding the stimulus loan, Ryan Cole, a partner with the Hi Neighbor restaurant group says, “It sucks. It is so difficult to navigate; it makes people so uneasy.” Cole says all three of his restaurants (Trestle, Corridor, and the Vault) received loans from the second round of the PPP, but he only plans to use the ones for Corridor — where he’s running an incubator program — and Trestle, which will soon launch a new takeout program. (The Vault remains closed for now.)

The problem with taking the loan and just, say, handing the money over to your employees during a time when your restaurant isn’t generating any revenue, Cole says, is that a restaurant owner will still be on the hook for roughly 10 percent in payroll taxes, as those expenses aren’t forgivable. And the upshot of the loan program’s eight-week deadline is that many restaurants, desperate to qualify for forgiveness, are going to hire more employees than they actually need.

Cole admits as much: He’s thinking of using his eight weeks of “free labor” to pay previously furloughed Hi Neighbor staff to do things like hand out flyers, work as delivery drivers, maybe even help run social media — all tasks he wouldn’t ordinarily have hired people to do.

What’s clear is that the PPP loan doesn’t provide any kind of long-term safety net for a restaurant. After all, Cole says, at the end of the eight weeks, as restaurants continue to struggle in the next phase of reopening, it’s likely that most workers who’ve been rehired using the PPP funds will be laid off once again. He says he’s been transparent with his own employees about that possibility — though he says, even in that worst case scenario, he’ll at least have saved them from depleting their unemployment funds for those eight weeks.


100 Van Ness Avenue, , CA 94102 (415) 834-5684 Visit Website

Minnie Bell’s Soul Movement

5959 Shellmound St, Emeryville, CA 94608 Visit Website