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Three weeks ago, Damien Watel submitted the required paperwork for a $180,000 emergency loan he hoped would allow him to keep his upscale French restaurant open – and his staff on the job.
The chef-owner of Bistr09 at 6106 Broadway St. had been using his savings to pay his workers even after the restaurant closed to diners last month in the wake of the coronavirus pandemic and his sales revenue dropped 94 percent.
“We’re on our third payroll since then, and obviously now it’s completely dried out, so I had to lay off … everyone” last Friday, Watel said. “We were in the hole 50 grand. There’s no way that we can make that with the little bit of to-go business that we have here and there.”
On April 6, Watel’s lender, Lone Star Bank, called him to say his application was accepted. Watel said the bank has been great to work with. But the Small Business Adminstration never funded the loan, and on April 16, after nearly two weeks of delays and technical issues, announced it had exhausted the $349 billion Paycheck Protection Program (PPP) loan fund.
Now Watel works the kitchen alone and waits to see whether or not the depleted PPP, replenished this week with additional funds approved by Congress, will catch up to him and the other small businesses the forgivable loan program was meant to help.
A small business is generally defined as one with 500 employees or less. But special exemptions for some sectors resulted in a large share of the initial PPP funds going to publicly traded companies already flush with cash, including $10 million for the Dallas-based Fiesta Restaurant Group, which owns the Pollo Tropical and San Antonio-born Taco Cabana chains.
On Thursday, the U.S. Treasury Department demanded those loans be repaid by May 7 and promised the funds would be returned to the program. Treasury Secretary Steven Mnuchin also said the PPP has already helped 1 million small businesses with fewer than 10 workers.
But the Texas Restaurant Association estimates that only 4.5 percent of funding from the $2.2 trillion coronavirus rescue package went to the restaurant industry and, in Texas, more than 688,000 restaurant employees have been laid off or furloughed since the beginning of the coronavirus outbreak.
Watel said he finds the situation frustrating. “I don’t want to blame anybody in particular for anything, but I see a bunch of restaurants that were doing to-go business mostly before [the crisis], and their business has increased,” Watel said. “They’ve got the same right to apply for money they didn’t even lose. So I think that’s a big frustrating part to me.”
If funding comes through on his loan, Watel plans to bring back at least half his employees initially. If he doesn’t get the money, he said, “I don’t even want to think about that.”
But he does. In the food business for more than 25 years, Watel owned several restaurants when the recession hit in 2007 and lost all but one. He closed Chez Vatel Bistro in 2017 and opened Bistr09 last year.
“This second blow in 10 years is hard to handle,” he said. The loan would provide only temporary relief, he added, since he’ll also have payroll taxes to consider.
Though Gov. Greg Abbott said he plans to OK reopening some businesses in the state next week, it may be too late for some to recover, Watel said.
“When we get the order that we can reopen, it’s probably going to be with quite a bit of restrictions,” he said. “If you do 50 percent of business … it’s still going to make you short.”
Watel also questions whether customers will return to restaurants like his if the economy continues to suffer and people spend less on dining out to conserve what cash they have. “It’s not a rosy outlook, that’s for sure,” he said.
Other PPP loan applicants had better luck.
Before the crisis began more than a month ago, Daniel Murray was seeing about 200 patients a week in his small chiropractic practice on the Northwest Side. He had three full-time employees.
Though the business is considered an essential service and not forced to close, Murray has been seeing only acute cases in the office. That cut his volume in half, he said.
So he reduced clinic hours and cut employees to half-time and applied for a $28,000 PPP loan through both his bank and a local credit union where he has a commercial account, to see which one would come soonest.
The credit union outsourced the processing of Murray’s loan and he doesn’t know its status. But approval from Frost Bank came through recently and he is expecting to receive the funds Saturday.
“I’m very happy, because this will allow me to bring my staff back full time, and we’re opening back up [on May 7],” Murray said. “We’re just anticipating that things will be less restricted. Of course, we’re going to follow state and local guidelines. Even though we won’t be working the same amount of hours, I’m going to go ahead and pay [my employees] full pay.”
A Frost Bank spokesman said of the 14,000 PPP loan applications it received, the bank was able to secure approval for 10,500, or more than 75 percent of its applicants. The bank was No. 14 on the SBA’s list of lenders with the highest number of PPP loans approved.
The largest category of businesses applying for PPP loans was in professional, scientific, and technical services, such as law firms, accounting firms, public relations agencies, and engineers, the bank’s spokesman said. The second-largest category was in health care and social assistance, followed by construction.
Two-thousand of Frost Bank’s applicants that were funded are based in Bexar County, and 67 percent requested payroll loans of $150,000 or less.
“We’re hopeful that our remaining applicants will be approved quickly once the SBA reopens the application process,” the bank spokesman said.
The SBA said Friday it will resume accepting PPP loan applications on Monday, April 27, from approved lenders.
Like banks, microlender LiftFund, a community development financial institution, has been accepting PPP loan applications.
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But because LiftFund is not a bank, it relies on donations and investments in order to lend money, said Janie Barrera, president and CEO of LiftFund. On April 13, LiftFund announced that investment bank Goldman Sachs was providing $25 million in backing of LiftFund’s PPP loans for Texas business owners.
But the SBA’s loan application had already been open to other lenders 10 days before the Goldman Sachs backing was announced. Three days after the announcement, the SBA said it had exhausted the funds Congress made available for the paycheck protection program and stopped accepting applications.
However, Barrera said, “it’s not that we can’t use Goldman Sachs money for the next tranche,” when the program is infused with an expected $310 billion in PPP relief funds and starts to accept new applications.
On Monday, LiftFund plans to submit 500 more loan applications on behalf of its customers, other small businesses, and nonprofits throughout Texas and Louisiana. The average loan amount is $40,000.
Credit Human has contributed another $10 million toward this effort, she said.
“We’re going to continue to put in applications,” she said. “We have funders that have said, ‘Listen, if you run out of $35 million and there’s still money [in the PPP fund], we will invest in you, too.'”