Small businesses in high-rent cities balk at PPP loans

Because only 25% of federal money can go to pay rent and mortgage-related expenses, owners in NY, LA and Chicago say they need more flexibility

National /
May.May 01, 2020 04:45 PM
Small business owners in high-rent cities like New York and Los Angeles are balking at PPP loan money, and calling for more flexibility in how they may distribute the funding. (Photo by John Nacion/NurPhoto via Getty Images)

Small business owners in high-rent cities like New York and Los Angeles are balking at PPP loan money, and calling for more flexibility in how they may distribute the funding. (Photo by John Nacion/NurPhoto via Getty Images)

Small business owners in high-rent cities like New York, Los Angeles and Chicago are finding the federal government’s $660 billion Paycheck Protection Program won’t pay the bills.

Because just 25% of a loan award can go toward rent, mortgage interest and utility payments, some restaurant and shop owners in metro cities have decided not to apply, according to the Wall Street Journal. In order for the PPP loan to be forgiven, 75 percent of the money must go to paying employees. Businesses that accept the funds also must rehire employees they have laid off.

Small businesses in less-populated regions — where rents are lower — have received a disproportionately-large chunk of the funding, according to the Journal.

Around 55 percent of small businesses in New York state have been forced to close but only 14 percent had secured PPP funding by mid-April, the report noted. By comparison, in North Dakota, just 20 percent of small businesses have shuttered but 44 percent have received loans.

Advocacy groups like the Small Business & Entrepreneurship Council have been pushing the federal government to ease restrictions on how companies choose to hand out the money.

“At the end of the day, employees need an actual business to return to if they want to collect a paycheck,” said CEO Karen Kerrigan. “There needs to be more flexibility provided in the rules.”

Public companies have also been able to secure loans — though several returned the millions following bad publicity — which critics argue runs counter to the aim of the program. [WSJ] — Dennis Lynch


Related Articles

arrow_forward_ios
Theaters in some cities are opening with restrictions. (Getty, Photo Illustration by Alison Bushor for The Real Deal)
Coming attraction: Movie theaters reopen in New York, San Fran
Coming attraction: Movie theaters reopen in New York, San Fran
(Getty, Photo Illustration by The Real Deal)
Retail had its reckoning. Will subleases flood the market?
Retail had its reckoning. Will subleases flood the market?
Gov. Andrew Cuomo's emergency powers are about to go up in smoke (Getty, iStock)
Cuomo to lose shutdown power, but could still extend Covid restrictions
Cuomo to lose shutdown power, but could still extend Covid restrictions
Keith McNally with Stephen Starr and David Edelstein (Getty, Patrick McMullan/Getty)
Pastis to open Miami restaurant in Wynwood
Pastis to open Miami restaurant in Wynwood
The comedy club argues that if SNL can operate, then they should be allowed to operate too. (Getty)
Manhattan comedy club sues Cuomo over pandemic closures
Manhattan comedy club sues Cuomo over pandemic closures
(iStock/Illustration by Alexis Manrodt for The Real Deal)
Order up: Real estate investors line up to buy drive-throughs
Order up: Real estate investors line up to buy drive-throughs
(iStock/Illustration by Kevin Rebong for The Real Deal)
A year later, deferred rent may be restaurants’ downfall
A year later, deferred rent may be restaurants’ downfall
(iStock/Illustration by Kevin Rebong for The Real Deal)
To boost economy, NYC will invest in rapid Covid test
To boost economy, NYC will invest in rapid Covid test
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...