Miami Restaurants With Paycheck Protection Loans Face a New Set of Challenges

Over the past few weeks, many small business affected by the coronavirus pandemic have been shut out of the first round of Paycheck Protection Program (PPP) loans, which ran out of money in just a few days. A new round of funding began after a $310 billion dollar refresh was signed into law last week, offering many a second shot at obtaining the loans. But in South Florida, even the few who have so far received the loans say the way the forgivable loan program is structured offers a new set of challenges.

Both rounds of the loans, which are meant to be forgiven and tuned into grants, are only forgivable if 75 percent of the loan is dedicated to payroll expenses, while the remaining part of the loan is set aside to things like rent payments and utilities. As part of the loan forgiveness plan, full-time employees must be rehired by June 30 to the levels they were working between February 15 and April 26. If these businesses don’t meet the requirements, they have to pay back the loan at a 1 percent interest rate over two years.

South Florida-based Latin Cafe 2000, which has three locations throughout Miami, was a recipient of a PPP loan. President and CEO of the restaurants Eric Castellanos said he’s faced several challenges since getting the loans, and he’s had a hard time getting his workforce back to pre-pandemic levels with in-room dining being closed. He notes he is concerned the company won’t hit the 75 percent employment threshold to qualify for loan forgiveness.

“We’re in a pickle because it’s like, how do we get to 75 percent [employment] when we’re closed?” Castellanos said. “Then you throw in the other monkey wrench that basically [workers] don’t want to come to work because of how much they’re getting in unemployment. It’s tough. We’re in a weird situation right now.”

While Florida has notoriously low unemployment insurance payments — topping out at just $275 a week — with the additional federal stimulus money of $600 per week added through July 31, laid-off and furloughed employees can sometimes make more money being unemployed than working.

Castellanos adds that he had to layoff 140 of his 210 staff members when Miami-Dade County temporarily closed in-room dining in March. But when the restaurants received the loan a few weeks ago, he says he called around 60 to 70 of his employees and he estimated about only 10 wanted to return to work.

And while employees by law are supposed to return to work if offered a job while receiving unemployment, the system seems to be so overwhelmed that the government isn’t following up on the claims made with employers.

“We haven’t gotten one unemployment call or letter or email. Nothing,” says Castellanos. But he hopes that when the government starts sorting through the paperwork and realizing the jobs are available, people will come back to work.

Popular Wynwood bar and eatery, Gramps, also received a PPP loan during the last round of funding. Its owner Adam Gersten has been pivoting his recently re-hired workforce of 30 employees to focus on various projects at the space, along with reopening its grab-and-go pizza eatery, Pizza Tropical, for takeout and contactless delivery.

But even with the new projects, he notes that some staffers are choosing to stay at home. Some assist with social media posts that amplify Gramps’ new offerings, while some are playing the role of caregiver for elderly family members, all while still on the payroll.

“The government has clearly failed at the state and federal level. So we’re taking this program and using 100 percent of the spirit of the program — which is to keep people paid,” he said.

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Correction: A previous version of this article stated Gersten was the owner of Wood Tavern, he is not. He is the owner of Gramps.