More aid money is on the way for small businesses.
President Donald Trump today signed into law a fourth stimulus package that includes $310 billion in additional funding for the Paycheck Protection Program (PPP), which ran out of money and stopped accepting applications on April 16.
“This is a very important piece of legislation,” Speaker Nancy Pelosi (D-California) said during debate of the bill. The U.S. House of Representatives passed the legislation on Thursday. “We come to the floor with such heartache, with such sorrow about those who have lost their lives and their loved ones, those who are suffering from the virus assault now and for those who are in doubt about their economic situation.
“It’s about the lives and livelihoods of the American people.”
The PPP was established in the Coronavirus Aid, Relief and Economic Support Act, which President Trump signed into law on March 27. The program began accepting applications on April 3, and its $349 billion allocation was exhausted nearly two weeks later.
The fourth stimulus package totals $484 billion and also includes $60 billion for the Small Business Administration’s Economic Impact Disaster Loan program, which provides low-interest loans of up to $2 million. Most EIDL loans come with a $10,000 advance upon application. EIDLs are most commonly disbursed after natural disasters have rendered businesses inoperable.
PPP loans are set at 2.5 times a company’s monthly salary costs and capped at $10 million; 75% of each loan must be spent on payroll. Businesses can spend their loans on payroll, rent, utilities and interest on mortgages and other debt. If recipients maintain their staff through June 30, all loan money, except for dollars spent on non-mortgage debt interest, will be forgiven.
To be eligible, businesses must have fewer than 500 employees, or fewer than the Small Business Administration’s industry-based size standard. For breweries, this number is 1,250.
Congress relaxed some of the rules that normally come with SBA loans, and loans were available to restaurants and hospitality companies regardless of size, as long as no single location employed more than 500 workers. This exception was granted to companies whose North American Industry Classification System (NAICS) code starts with 72 and belongs to the grouping for accommodation and food services.
Breweries have their own NAICS code, 312120, which classifies them as manufacturers, rather than service-oriented businesses. However, there are 3,011 brewpubs, which brew beer and operate as restaurants.
So, this week, the Brewers Association (BA), the national trade group representing small and independent craft brewers, filed a comment with the Office of Management and Budget to create a new NAICS code for brewpubs that would fall under the restaurant industry category.
“As such the production of beer for onsite sale makes these businesses clearly differentiated from the larger classification, while the restaurant component keeps brewpubs distinct from the larger brewery sector,” the BA wrote.
The nation’s 2,966 taproom breweries, which sell 75% of their beer on-site but do not operate restaurants, would remain classified as manufacturing breweries.
Amidst the much bigger things the Brewers Association is working on right now, we just filed comments to the OMB in support of creating a new NAICS code for brewpubs. If you'd like to read our comments, they are linked here:https://t.co/MIj5P3sqmq
— Bart Watson (@BrewersStats) April 24, 2020
The BA and nonprofit fundraising organization Bottleshare today announced the “Believe in Beer Fund,” which aims to raise $1 million by May 17 to support craft breweries and state brewers guilds that have been affected by the pandemic.
The loophole for companies with NAICS codes that begin with 72 opened the door for large national chains, such as Ruth’s Chris Steak House and Potbelly, to apply for and receive funds when smaller, local businesses were shut out.
Shake Shack, a national fast casual chain, returned its $10 million PPP loan earlier this week. Ruth’s Chris announced Thursday that it would return the $20 million in PPP money it secured by applying through two subsidiaries.
The SBA added additional guidance that “borrowers still must certify in good faith that their PPP loan request is necessary.”
“It is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith,” the SBA wrote in frequently asked questions for lenders and borrowers.
The SBA added that companies that received PPP money but didn’t meet the intended requirements of the program can repay their loans in full by May 7 and be deemed to have acted “in good faith.”
Earlier this week, class action lawsuits were filed against some of the country’s largest banks for giving preference to larger loan requests.
To date, craft breweries known to have secured PPP loans include Trillium, Other Half, WeldWerks, Jack’s Abby, Stonehome Brew Pub, Surly, Denizens and 2nd Shift. Applications from The Bruery and Departed Soles were not accepted in the first round.