The COVID-19 pandemic has hit few industries as hard as it has hit the restaurant industry. With shutdowns starting in March 2020, bars and restaurants struggled to keep their doors open and pay their employees. As a result, this industry is in desperate need of financing, and here's why.
The Challenges Bars & Restaurants Are Facing
Despite the CARES act and other state measures to help provide emergency funding, the National Restaurant Association estimated that COVID-19 would put 110,000 restaurants out of business. That amounts to almost 17 percent of the industry.
It has also drastically affected the national unemployment rate. Restaurant closures nationwide have put 2.1 million people out of work, according to official numbers; however, there is widespread speculation that this estimation is only a fraction of the real number. For these reasons, there have been several attempts to provide financial relief for businesses in the food industry.
COVID-19 Funding Resources for Bars and Restaurants
The initial CARES Act rolled out last year but unfortunately did not provide the relief that lawmakers hoped it would. Now another restaurant relief bill, the RESTAURANTS Act, has struggled to pass in the Senate despite initial success in the House.
Meanwhile, the Federal Government also introduced the Paycheck Protection Program in 2020. This plan helped fund small businesses, including bars and restaurants, with some limited success.
The RESTAURANTS Act promises to provide $120 billion to restaurants around the country. The first businesses in line for relief would be those with less than $1.5 million in yearly revenue. It would also prioritize female-, minority-, and veteran-owned companies.
Since national financing has been too slow for a lot of business owners, other regional resources have surfaced for bars and restaurants around the country. Some of these are intended for restaurant workers, while others are for restaurants owned by people of color. Others are available to any restaurant or bar owner who applies.
Some examples of restaurant financing companies providing aid during the pandemic include:
- The Food and Beverage Industry Relief Fund for Black and Indigenous Americans
- Facebook’s Small Business Grant Program
- The Restaurant Workers’ Community Foundation’s COVID-19 Emergency Relief Fund
Additionally, restaurant and bar owners may qualify for tax deductions under the Employee Retention Tax Credit, which they can claim through their payroll taxes.
What Business Owners Are Using Stimulus Funds For
Business owners have to allocate their stimulus funds carefully to keep their company afloat. Some prioritize payroll to ensure that their employees receive everything they earn, especially if their employer owes them back pay.
Other business owners are using their stimulus payments to catch up on their rent. Like anyone else, they need to pay for the space they occupy. They can only fall behind so far before losing their license and their right to continue conducting business on the property.
Lastly, some business owners are using the stimulus funds to buy restaurant equipment. This ensures that they can still keep their business running even under COVID-19 guidelines.
Restaurants Are Hopeful For Loan Forgiveness
The Paycheck Protection Program, introduced in 2020, was intended to provide restaurant relief and recovery. It offered small business loans for restaurants as well as businesses in various other industries.
Restaurants and bars that were eligible received loans, but the terms of the loan were complex. Specifically, they mandated that restaurants use the money they received within eight weeks to qualify for loan forgiveness. This meant that restaurants spent the funds quickly, some still under lockdown.
In June 2020, Congress altered the original terms of the bill. Restaurants now had 24 weeks to use the funds. Sadly, it was too late for some businesses, many of which opted to continue paying their employees even while closed under state or federal mandates.
Now, many restaurant owners are depending on qualifying for loan forgiveness in the future. Others are looking for the best banks for restaurant loans in a last-ditch attempt to find a way to keep their business afloat.
What Does The Forecast Look Like For Bars And Restaurants?
It is difficult to predict what the future will look like for bars and restaurants. The COVID-19 pandemic is unprecedented, and scientists, politicians, and economists can only speculate what will occur. There are, however, some guesses at what the next few years will look like for the restaurant industry.
It is already evident that the future will hold some changes. More than 70,000 bars and restaurants have shut down under the weight of the pandemic. Many others have radically altered their operations, prioritizing curbside pickup and delivery over dine-in options.
Experts predict that many restaurants will have to implement new menus. This is because the pandemic has radically affected the national food chain, making it a challenge for restaurants to source ingredients as they usually would.
There is also likely to be continuing emphasis on health and safety measures. Customers are also expected to continue to demand takeout and pickup options and outdoor dining.
Recovering From The Pandemic
Pandemic recovery will be a long road for bars and restaurants around the country. But there are a few helpful tips that business owners may want to consider moving forward.
First, consider applying for an SBA Disaster Loan. This plan incorporates PPP loan and other loans for restaurants COVID but is also appropriate for disasters of different kinds. These restaurant loan rates are low. An SBA loan intended to protect your business in the event of a large scale disaster or crisis. It may take a while to receive funding, but it is still a worthwhile investment. In the interim many restaurant owners are applying for small business loans to keep them afloat during these difficult times.
Many bars and restaurant owners are also reflecting on whether they can genuinely survive a recession. This is an important thing to ask oneself. Remember that the follow-up of the COVID-19 pandemic will probably last for many years to come, especially in its effects on the economy. For this reason, restaurant owners should be as prepared as possible to weather the storm and, with any luck, come out the other side unscathed.
About the Author, Madison Taylor
Madison Taylor is the Brand Ambassador at ROK Financial. She is responsible for raising brand awareness and business relationships with business owners across the country. Madison loves that she plays a small role in getting Business Back To Business Through Simple Business Financing and looks forward to hearing what you think about the blogs she creates!Madison has been working in the financial space for six years, and loves it! When she is not at work, you will find her at home learning a new recipe to test out on her family or going on new adventures with her friends.