'Mom & Pop' shops worry they will be squeezed out of small business
coronavirus aid
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[April 03, 2020]
By Richard Cowan
WASHINGTON (Reuters) - Family-owned
restaurants fear they could be pitted against larger competitors, hotel
chains and potentially investment funds in a race starting on Friday for
a $349 billion pot of money the U.S. government will offer businesses
hard-hit by coronavirus.
Enacted into law last week as part of a $2.3 trillion economic stimulus
triggered by the outbreak, the program aims to keep small businesses on
life support for at least the next two months.
The term "small business," however, took on a new meaning when a 56-word
provision was inserted into the 148,124-word bill that raced through
Congress.
For certain small business loan purposes, the term typically refers to
companies that employ fewer than 500 workers. But Congress and the Trump
administration agreed to include large hotel and restaurant chains, as
long as they employed fewer than 500 workers in a given location.
Now, private-equity firms, venture capital funds and other large
investors are also angling for a piece of the action.
Some smaller restaurants worry they could be shouldered aside by
well-connected corporate operations.
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"Who needs the support most desperately - the Big Mac or the Small-Fry?"
the management of The Eleanor restaurant in Washington wrote on
Instagram last week.
Jared Bernstein, an economist at the liberal-leaning Center on Budget
and Policy Priorities, said well-oiled bigger enterprises could get to
the head of the line for loans that will be allocated on a first-come,
first-serve basis.
"At the end of the day it's going to be very hard to figure out how to
help the smallest, most vulnerable businesses. We're in a tsunami here
and some people will get washed away," Bernstein said.
Before Congress could even pass the economic stimulus, consultants
advised clients to ready their applications for "forgivable" loans that
can turn into grants if the money is used for payroll, rent and other
expenses.
"We would advise consulting your own preferred lender now," the Berman
and Company public-relations firm wrote to clients on March 25, two days
before President Trump signed the bill into law.
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Empty restaurant tables sit on a plaza on Pennsylvania Avenue in
during the coronavirus outbreak in downtown Washington, U.S. March
31, 2020. REUTERS/Jonathan Ernst
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Restaurant and hotel owners and their workers, reeling from
shutdowns, were high on policymakers' list of concerns as they
crafted the bill.
The restaurant industry lost $25 billion in sales and 3 million jobs
in the first three weeks of March, according to the National
Restaurant Association, a trade group that represents various-sized
food establishments.
"Mom and Pop" family-owned operations account for 90 percent of
restaurants.
Health-club and beauty-salon chains are also clamoring for a piece
of the pie.
Private equity firms and investment partnerships also asked U.S.
Treasury Secretary Steven Mnuchin this week to be included.
"It shouldn’t matter if these companies are backed by investments
from corporations, pension funds, or others," said Drew Mahoney of
the American Investment Council, which represents the industry.
Nearly 20 members of Congress also want start-up companies backed by
venture capital firms to participate in the program, arguing that
they created 3 million jobs in 2019.
"We cannot let this terrible pandemic lead to irreparable damage to
our most innovative and vibrant businesses," wrote the lawmakers,
led by Rep. Anna Eshoo, a Democrat who represents California's
Silicon Valley.
But smaller firms worry they may get crowded out by better- equipped
rivals that have the resources to get their applications in quickly.
Without the money, many may be forced to close their doors.
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"It is a lifeline. The stakes are really high," said National
Restaurant Association lobbyist Shannon Meade.
(Reporting by Richard Cowan; additional reporting by David Lawder,
Lucia Mutikani and Patricia Zengerle; diting by Andy Sullivan and
Dan Grebler)
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