Chris McDade, chef and owner of Popina, a 34-seat restaurant on Brooklyn’s waterfront, obeyed New York City’s 50-percent seating reduction when it was announced on March 12, when local Covid-19 cases first began to spike. A week later, all onsite dining ended. He offered takeout and delivery for another week or two before he laid off all his employees—fewer than a dozen—and closed his doors. “We decided it wasn’t really worth it and we weren’t sure how reckless we were being, and since then we’ve been closed,” he says. 

McDade applied for federal coronavirus aid, but he was turned down, along with 129 of his accountant’s 146 clients. He’ll apply for second-round funding—as $310 billion more in small business aid moves through Congress as part of a new $484 billion package—with a slightly better sense of what the money will mean to his struggling business.

“In the beginning, it sounded great,” McDade recalls. “It’s like, we’re going to give you some free money. Your accountants are telling you to take it because it’s free.” Reality is more complicated than that.

Small business aid, as defined by the Paycheck Protection Program (PPP) that Congress authorized in late March, is fraught with potholes for independent restaurants. PPP provided $350 billion in low-interest loans that can be forgiven if certain requirements were met, but it’s a challenge: Restaurants must retain or rehire 100 percent of their staff by the end of June, even as they face operating at significantly reduced capacities.

Falling short means restaurants will re-open with built-in debt. While the interest rate on PPP loans are a low, fixed 1 percent, money has to be paid back within two years, which some restaurateurs feel is too short of a time frame; an earlier plan called for the loans to be paid back over five years at .5 %. 

The National Restaurant Association (NRA) projects a $240 billion industry loss by the end of this year, and has requested that amount in restaurant aid from Congress, with more flexible terms—having campaigned in the first round for the inclusion of chain restaurants, by suggesting that the 500-employee ceiling be per location. The food service and hospitality sector received less than 9 percent of first-round funds, much of it going to large companies like Ruth’s Chris Steakhouse and Shake Shack, to loud complaint; within days Shake Shack pledged to return its $10 million in funding. The agency gave more than a quarter of approved funding to less than two percent of loan recipients across the board.

Geoffrey Bezuidenhout, owner of Picnikins, a restaurant and catering service in San Antonio, Texas, applied twenty minutes after his bank’s online portal went live, but he says a “glitch” in the system prevented his application from getting processed. He’s hoping that Congress quickly tops up PPP funding so that he can re-apply and keep his business—which switched to grocery and meal delivery service in March—running. No one in his company’s upper management has taken a salary in the past six weeks, he tells The Counter, and he’s been operating under the assumption that the business would eventually get a piece of the PPP pie.

“Now we’re having to tap into reserves to pay for inventory and labor,” he says. “It’s not sustainable,” though he didn’t specify how much he’s spending out of pocket, or how much he hoped to receive from the program.

Owners who secured loans face a different kind of uncertainty: whether they’ll have to pay the loans  back, and how they’ll manage it.

When the applications for the SBA loans opened, Jason Wang, CEO and co-owner of Xi’an Famous Foods, a popular chain of noodle spots in New York City, applied for PPP for two separate business entities—his central kitchen, and the company that employs the workers in his restaurants. He submitted both applications at the same time, but received funding only for his central kitchen. 

He’s unclear about what he should do with the money. The loans will only be forgiven if he spends at least 75 percent of the money on payroll, while the rest can be used on other bills, like rent and utilities. But if Wang pays his employees to stay at home, they’ll lose their unemployment benefits. As Politico reported on Monday, many laid-off restaurant workers are making more from unemployment than they would at work, so maintaining the payroll is unlikely to be an option. And there’s no guarantee he can hire everyone back, even if he does reopen in a month, when New York’s stay-at-home order is tentatively scheduled to end. 

“Even if we were to have enough employees who feel safe enough to work right now—that’s a stretch—we’re not going to have customers that are willing to go out and eat,” he says.  

“On one hand, the federal government is saying, hey, here’s the money, go use it and get the economy back up and running. On the other hand, the state government is saying, don’t go out, everyone is supposed to be staying home. Don’t go out unless you have to. Which I understand,” he adds. Under federal rules, recipients of PPP loans have until June 30 to use the money to qualify for loan forgiveness. It’s not clear whether that deadline will change if local stay-at-home orders are extended past that date.

Some restaurateurs believe that the terms of PPP funding should be flexible depending on the region in which a borrower operates. 

“It shouldn’t be that someone in a place that has much less of an outbreak than New York should be held to the June 30th deadline that we are,” says Brian Owens, owner of Crave Fishbar, a seafood restaurant with three locations in Manhattan.

Owens says that he wrangled together his application for PPP funding before he even knew whether he would have to pay it back. He received a little over $1 million, which he’s using to cover fixed expenses, like rent for his Upper West Side restaurant, which runs $30,000 per month, and mortgage payments for his other locations. He’s resigned to the fact that he most likely will not meet the criteria for loan forgiveness.

“I know I’m going to have to redo my floor plan, whether that’s keeping a certain distance [between tables] or reducing occupancy by 50 percent,” Owens says. “We’re really anticipating opening up to a really slow business model in the beginning.”

Instead, Owens expects to refinance his loan over a longer period.

McDade, the owner of Popina, doesn’t expect loan forgiveness, either. “I’m kind of glad we didn’t get it, because if we apply again in the second round, we’ll use it as a loan that we’ll have to repay,” he says. There’s just no way his tiny restaurant can continue to practice social distancing without dramatically reducing the number of tables inside—which likely also means reducing the number of staff members in a given shift. Based on a loan formula that caps limit borrowing to 2.5 times average monthly payroll costs, McDade says he is eligible for $130,000 at most.

For now, most of the restaurant owners we spoke to are hoping Congress or the SBA will relax some of the loan restrictions by extending the deadline or offering more flexible start-up grants and loans. 

In addition to industry-specific loans, NRA is asking Congress to provide grants to help restaurants pay for renovations to accommodate social distancing regulations, and proposes lowering the 75 percent payroll spending allotment currently required by  the PPP.

In the meantime, McDade is spending time with his 16-month old son and brainstorming ways to help out undocumented workers in the restaurant industry who can’t benefit from the PPP, unemployment, or stimulus checks. He’s trying to imagine a future for Popina that looks dramatically different from the past, with fewer seats and potentially just four tables, depending on city guidelines.

“We’re going to pivot for a while, I think. For as long as it makes sense. We’ll still keep the ethos of what Popina is, it’ll just look a lot different,” he says. “We’re not exactly sure how it’s going to work yet. But it will allow us to be creative in other ways, and allow us to serve our community.”