SAN FRANCISCO (CBS SF) — Since its opening two years ago, San Francisco’s Che Fico was considered one of the hottest new restaurants in the country, but co-owner David Nayfeld said it was barely making ends meet.
“We were just getting by, in terms of making just enough money to save a little bit and incrementally get ourselves out of the debt that it costs to build a restaurant here in San Francisco,” Nayfeld told KPIX 5. “So the truth is the industry here, and the industry all over the country has been on life support for quite some time.”
So when the government first rolled out its forgivable loan program or PPP, it was seen as a lifeline for small businesses. Nayfeld received his funding about two weeks ago. Now, Nayfled said he’s more than likely going to give it back.
“One of the misconceptions about the loan is that you can just spend it on pay and the thing is people assume that means for every dollar out, you can get forgiven a dollar,” he said. “And that’s not the way it works.”
The PPP loan requires businesses to show that at least 75% of the money went toward payroll costs and maintain their pre-crisis headcount in the 8 weeks after receiving the funds. But many restaurants are operating on skeleton crews.
The timeline is a big part of the problem, Nayfeld said.
For example, Che Fico would need to accrue 1,200 hours a week of labor for the loan to be forgiven. With the shelter-in-place order in effect for three more weeks, it would be impossible to put all his furloughed staff back on payroll.
“It’s a complete question mark as to whether or not the loan is just going to become debt that’s sitting on your balance sheet that ends up being something that sinks your business in the future, or something that’s going to be forgiven,” said Nayfeld.
He’s on the fence about using the cash, because of the uncertainty of business returning to a normal rate.
Nayfeld said he joined a town hall call with House Speaker Nancy Pelosi last week, and she said she was planning on proposing in the next stimulus bill that the PPP timeline get extended.