Even as Bill and Jim Carver plan to reopen their iconic Durango brewpub and look for all the capital they can, they’ve returned the money they had received from the Small Business Administration through its Paycheck Protection Program.
At first glance, the program looks attractive: If a business spends 75% of its PPP loan on payroll costs, the loan is forgiven and is essentially converted into a grant.
However, there is a catch, a time limit. A business must spend its PPP funds within eight weeks of receipt of the loan.
It’s this time limit that has many small businesses, especially restaurants, discovering they can’t meet the two-week deadline as COVID-19 restrictions persist, keeping them from fully opening.
“The ironic part of all this, is that PPP is helpful to businesses that are doing OK during the pandemic. These businesses have sales and payroll. For them, it’s easy to meet the payroll test,” said Bill Carver, co-owner of Carver Brewing Co. with his brother, Jim.
“But it’s not particularly helpful if you’re highly affected by the virus. If you’re not open, you don’t have sales, and you don’t have payroll. You still must reach your full employment level within eight weeks of receipt of your PPP, and you may be at only 30% of capacity,” he said.
The days are ticking down, and the brewpub is still not open, and when it does open, it will likely be on a restricted basis, so Bill Carver said they decided to pay back their PPP rather than risk letting the funds turn into a loan they had to repay.
Bill Carver said they are following two paths on the utility of the PPP program – they decided to keep the PPP to assist them in the reopening of their second brewpub, the Glenwood Canyon Brewing Co.
“We’re hoping for some rules change in PPP that would work for us, but we decided to keep the PPP for the Glenwood brewery. I guess we split our bets,” Bill Carver said.
The Carvers have discussed their issues with the PPP program with Sen. Michael Bennet, D-Colo.
They say Bennet’s proposal to modify the PPP by extending the payback period from eight weeks to 16 weeks and creating an additional longer-term loan – a seven-year loan, with no interest due the first year and no principal due for the first two years – will help make PPP funds more usable to restaurants and brewpubs like Carver.
Sen. Cory Gardner, R-Colo., is sponsoring legislation that would extend the PPP payback period from eight weeks to 16 weeks.
“If people want local restaurants, brewpubs, salons, hotels and shops to be part of the fabric of their town, they should support Sen. Bennet’s legislation,” Bill Carver said.
The Wall Street Journal has reported numerous lawmakers in Washington are looking to make changes to the PPP so it would be more helpful to the hardest-hit businesses in the pandemic, and changes in rules could come within a week.
Jim Carver says the pity of it all is PPP funds would have helped the company gear up to reopen.
“The reality is before you reopen, you’re preparing a week ahead of time. You’re ordering food, you’re prepping, you’re dicing, you’re making salad dressing. At least five days before we reopen we’ll be incurring costs and we’ll have zero food sales for five to seven days,” he said.
Insurance costs, business loans, utilities, food and rental costs continue whether a restaurant is open, Jim Carver said.
“Every day the hole gets bigger,” he said.
Jim Carver said as Carver’s plans to reopen, it is also dealing with $150,000 in invoices that have come in since the brewpub closed at the end of March.
“This isn’t only Carver’s dealing with this,” he said. “It’s millions of restaurants across the country. We’ve created this cash-flow crunch that many restaurants will have a hard time weathering,” he said.
The Carvers said they are lucky because they own their building and don’t have to cope with a mortgage. Both the brewpub synonymous with Durango and the second one in Glenwood Springs will be among the small businesses that survive COVID-19.
Bill Carver said the PPP program is valuable for some small businesses and with a few tweaks, it would be even more useful to those mom-and-pop restaurants, shops and salons that have been the hardest hit by COVID-19 restrictions – ones that have been shuttered for two months.
The Carvers also have not given up on eventually applying for a PPP loan that is less restrictive and more functional for the situation they see in Durango.
Whether or not PPP is tweaked, Bill Carver said he is optimistic about the overall economic outlook for Durango.
“People don’t want to fly, and we’re a drive-to market. We have a lot of outdoor recreation. People will not be wanting to go to large urban centers,” he said. “I think people are going to want to come to Durango, and they are going to feel safe, and I think they will be.”