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Fiachra O’Shaughnessy, manager of McTeague Salon on Polk Street, shook his head in disbelief when told that the government had been unable to do business at all due to the prolonged closure during the Covid emergency.
Barr was among more than 60% of applicants for the $28.6 billion Restaurant Revitalization Fund (RRF), a federal restaurant rehabilitation pool established in March 2021, and received nothing from the program. O’Shaughnessy received money from the previous Paycheck Protection Program, but the bar orders to close — combined with the caveat that a certain amount must be spent on wages — meant that no more than a quarter of the $220,000 McTeague received in federal PPP money was forgiven. The bill came in June as the bar continued to decline from around 40% before the pandemic, O’Shaughnessy said.
As hopes for more federal aid dwindle, so does the money from a $750,000 economic damage loan Barr took out to deal with the outbreak. McTeague’s story is an example of a severe debt crisis that threatened to boil over and destroy small businesses around San Francisco.
“There are so many people in the same boat as us,” O’Shaughnessy said. “There were people who made more mistakes than that, people who took out second mortgages on their homes. They’re going to have a tougher time than that.”
SF New Deal, created during the pandemic to support small businesses in the city, published a new study on how the growing debt burden, the result of more than two years of pandemic-related setbacks, is hampering the recovery.
Among other efforts, the charity ran a $1 million grant program aimed at unrepresented operators with five or fewer employees, giving 400 businesses $2,500 each. A follow-up survey of those recipients found that nearly a quarter owed at least $150,000, and twelve percent owed more than $300,000 to creditors. 37 percent of small businesses surveyed listed debt collection as a major challenge.
Rising interest rates are making a bad situation worse, as small businesses face higher debt burdens, coupled with inflation-driven increases in commodity prices. In response, the report supports additional funding for grants and tax credits, along with additional accounting, legal and other support.
Laurie Thomas, executive director of the Golden Gate Restaurant Association, said without more relief, a wave of personal loan defaults and even foreclosures are inevitable.
“Restaurants and businesses like that are like marriages,” says Thomas. “They may look beautiful on the outside, but you never know what’s going on underneath.”
Kevin Truong can be found at [email protected].
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