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Chefs & Restaurateurs: What To Do Now That the Stimulus is the Law

March 27, 2020

Dear Chefs & Restaurateurs, 

It is difficult to process all the COVID-19 related information out there, and to know what’s best in terms of operating procedures, furloughing, messaging, and financial decisions. We are all writing that playbook as we go.

There are, however, standard operating procedures for loans governed by the SBA, and with Congress moving forward with a stimulus bill, now is the time for due diligence on how to prepare, apply, and access potential funds so you can receive them in a timely fashion. These are steps, but should all be worked on in parallel, not one at a time. 

Understand your current position and needs

Once cash flow is turned off, most restaurants need a loan just to get to a positive balance. The first thing to do is calculate your current cash position by establishing your accounts payable, pending payroll, potential PTO/sick pay owed, health insurance costs, rent/mortgage due, and any other potential expenses versus cash on hand. 

Talk to your bank

Contact your bank and confirm they are a qualified SBA lender. If you don’t already have an established relationship, contact a commercial banker to begin a dialogue. 

Call your accountant

Contact your CPA and get electronic copies of 3 years tax returns(business and personal,) a balance sheet, and P&L statements for 2019 and YTD 2020.

Personal financial statement

Fill out a personal financial statement and make sure it is current within the past 90 days. 

Contact your partners

Have any partner that owns 20% of your company get together copies of their K-1s, tax returns, and personal financial statements for the last 3 years.

Build projections

Build pro forma projections for the rest of 2020 and 2021. Assume you will reopen in June with 50% of your normal sales and ramp up from there. Build cash flow statements for one year and put a budget together so you know how much funding to request. 

Use forgivable loans to rehire your employees

Forthcoming legislation from Congress will establish a $350 billion "Paycheck Protection Program" for small businesses. Qualifying restaurants could borrow two-and-half times their monthly payroll (up to $10 million) and use that money on the payroll, rent, and utility payments that allow them to keep their doors open. Eight weeks of payroll, rent, mortgage payments, and utilities could then be entirely forgiven from that loan, if the restaurant maintains payroll over the course of the loan.

While a government program, loan origination and forgiveness would be managed directly by a restaurant's trusted financial institution. 

Disclaimer: It is important to note, that as of this writing, the bill has not passed the House of Representatives, and that final details are thus subject to change. This document was prepared by chefs and restaurateurs, and should not replace advice or direction by bankers, CPA’s, attorneys, or other professionals. It is meant as a peer-to-peer guide to help you appraised of upcoming developments for our industry.