Tucked inside Congress’ latest round of small-business relief is some rare good news for restaurants, hotels and the performing arts — three sectors that have been especially hard hit by COVID-19 restrictions in Seattle and elsewhere.
Under a new provision of the Paycheck Protection Program (PPP), restaurants and hotels can apply for forgivable loans that are 40% larger than were available when the emergency small-business program launched last spring.
And thanks to the new (and aptly titled) Shuttered Venue Operators Grant (SVOG), theaters and other live performance venues hurt by the pandemic can apply for grants of 45% of their 2019 revenue, up to $10 million. Museums, movie theaters and talent firms can also apply.
Part of the $900 billion in COVID-19 relief legislation enacted last month, both programs are being run by the Small Business Administration.
In the Seattle area, the two initiatives could be crucial to businesses and organizations whose pandemic-related losses didn’t get enough help under Congress’ first COVID-19 measure, the CARES Act.
That includes institutions such as Velocity Dance Center, a beloved Capitol Hill arts organization and one of many local venues that has struggled since live performances were shut down last March, despite getting some federal emergency aid early on. The new grants “would make a huge difference for us,” says Erin Johnson, interim artistic and managing director.
One big improvement: the dollar amount of the individual loans and grants can be bigger.
Under the SVOG program, for example, venues are eligible for substantially larger sums than with a PPP loan. (Performing arts venues can’t get both a PPP and an SVOG; they need to choose.) Velocity Dance Center could get around $145,000, or roughly three times what it got with a PPP loan last year, which is potentially enough to stay afloat until vaccines make live performance possible again, Johnson says.
Restaurants and hotels, meanwhile, now can get PPP loans equivalent to three and a half times their average monthly payroll, instead of just two and a half, as was the case last spring. (Other small businesses can get in on the second round of PPP loans, but only at the original two and a half multiple of payroll.)
Those extra-large PPP loans — which, as with the first round, won’t need to be repaid if funds go for payroll and other allowable expenses — will be crucial for many restaurants that are barely hanging on. That’s especially the case in Washington since Gov. Jay Inslee reimposed the indoor dining ban in November.
“With the current shutdown we are losing money every week,” says Charlie Anthe, co-owner of Moshi Moshi Sushi & Izakaya in Ballard. Moshi Moshi got a PPP loan last spring and Anthe says a second loan will “help us make it through the winter.”
Both of the new relief initiatives are targeted in other, more industry-specific ways. Restaurants and hotels, for example, now can use PPP loans to cover a wider range of expenses, such as bills from major suppliers, without affecting the loans’ forgivability.
That broader criteria reflects the reality that restaurants must do more than just pay their own expenses if they want to thrive after COVID-19, says Steve Hooper Jr., president of Seattle-based Ethan Stowell Restaurants. “Our industry is more than labor and rent — it’s also things like taking care of your purveyors and supply chain” so that they, too, are still in business after the pandemic, he adds.
The new PPP loans also have a longer time frame — the funds can be used over either an eight-week or 24-week period — helping ensure that restaurants have cash reserves to cover startup costs once restrictions finally lift, Hooper says. The new PPP loans give restaurants “the capital they need to restock their refrigerators … rehire their people and be ready for the return to … whatever phase we’re in next,” he adds.
That extra time and capital will be critical for restaurateurs and hoteliers in hard-hit areas like downtown Seattle, which may not see a real recovery until tourists and office workers return, says Shawn O’Donnell, whose American Grill and Irish Pub is one of the few restaurants still open in Pioneer Square.
O’Donnell’s first PPP loan last year covered “four months of payroll, rent and utilities” and allowed O’Donnell to call back nine cooks and other help. “Everybody who wanted to come back, we were able to bring back to work,” he says.
But like many downtown restaurants, O’Donnell must now hold on until the largely empty office towers nearby are refilled with workers. To do that, he’ll need a second PPP loan, which he’s already talking to his banker about. (As before, PPP loans are offered through commercial banks using Small Business Administration, or SBA, guidance.)
Restaurateurs and hoteliers still need to use caution with PPP loans. Some expenses, such as linens, appliance repair or replacement, or insurance premiums, still can’t be covered with loan proceeds, meaning any funds spent on those might need to be repaid, says Hooper.
But given the program’s low interest rate — 1% — and a five-year payoff, that still may be a good outcome, says Lewis Horowitz, an attorney at Pacific Northwest-based Lane Powell who has advised firms on PPP loans. Even with partial repayment, “the PPP proceeds may well make the difference between survival and bankruptcy,” he says.
The SVOG program is similarly tailored to the entertainment sector’s special challenges.
The grants, which will probably be dispersed directly from the SBA, can be spent through 2021. That extended time frame will be crucial for businesses that might not be allowed to reopen until fall and could need even longer to rebook a full calendar of shows, says Steven Severin, co-owner of Capitol Hill club Neumos.
“It could very well not be till 2022 until we get to start doing shows again,” says Severin, who, as co-founder of the Washington Nightlife Music Association, was one of the industry insiders who advised policymakers writing the legislation. And, he adds, given some of the problems with the vaccine rollout, “it’s going to be a while.”
The SVOG program also prioritizes the hardest-hit venues: Those that lost 90% or more of revenues due to COVID-19, compared to 2019, are first in line for grants. (Venues with lesser losses come later.) That’s important for businesses that may have done zero business since March, Severin says. Some funding is also reserved for establishments with 50 or fewer full-time equivalent staff positions.
And, importantly, the SVOG program narrowly defines eligibility. Live venues, for example, must get at least 70% of revenues from cover charges, ticket sales, production fees or other performance-related sources. That criteria was meant to filter out businesses that may occasionally host live music, for example, but make most of their money “on beer and nachos,” Severin says.
Severin says provisions like these, which industry insiders helped get into the law through their Save Our Stages lobbying work with the National Independent Venue Association, will help ensure that the program’s limited funds — $15 billion — go where they’re most needed.
The PPP program also benefited from industry input. Although a more ambitious proposal, known as the Restaurant Act, failed to pass last year, the industry’s lobbying efforts did get key features, such as more allowable expenses, into the new PPP loans. That’s going to be crucial for a sector that was among the most critically impacted by pandemic losses.
Washington state has lost 2,369 restaurants and bars — 1,023 in King County — since March, according to a December report by the Washington Hospitality Association. The broader hospitality sector, which includes hotels, accounted for almost one in eight new claims for unemployment insurance during the pandemic, according to state Employment Security Department data.
Congress also tried to make the new PPP loan program easier to use than was the case during last spring’s rollout, which was plagued by delays and confusion.
For example, small businesses filing for a second PPP loan often can reuse payroll and other business information from their first application, Horowitz says.
There are some additional loan criteria — for example, second-time PPP borrowers can’t have more than 300 employees (compared to 500 for most first-time borrowers), must document losses incurred during the pandemic, and can only borrow a maximum of $2 million (compared to $10 million for first-time borrowers). But much of the program should be largely familiar for both lenders and borrowers, he adds.
Backers of the new programs didn’t get everything they wanted. In the final days of congressional negotiations, other cultural organizations like museums and movie theaters were included in the bill, which means more competition for limited grant dollars, Severin says.
There have also been complaints that the legislation was delayed so many months by politics that many restaurants, hotels and venues that might have survived instead had to permanently close or make painful cuts.
Velocity Dance Center, for example, had to move from its iconic but expensive 12th Avenue location, and is still surviving “payroll to payroll,” Johnson said.
But like many of her fellow venue operators, Johnson is hopeful the new funds could get the sector through the final stretch of the pandemic — and ensure that communities like Seattle don’t emerge from the crisis with a drastically smaller performing arts sector.
Severin agrees; he estimates there are “at least 10 [venues] that would close tomorrow if they didn’t know this lifeline was coming.”
Johnson sees longer-term benefits, as well. She thinks the SVOG initiative — and the lobbying that went into it — could help policymakers better understand the performing arts not simply as a “frilly fringe benefit” of living in a place like Seattle, but as a legitimate business sector that’s just as deserving of government support as other sectors.
“Artists and arts workers struggle to be seen in the same context as other businesses,” Johnson says. “So I’m hoping that this is a hint at more recognition and more support on a federal level to the arts … as an industry, as opposed to as something that needs charity.”