Public companies that have been pushed to repay federal stimulus loans have few options to keep workers on the payroll
Many companies had looked at the Paycheck Protection Program, which provides forgivable government loans to companies that use at least 75% of the funds to cover payroll, as a way to keep employees paid as they waited out the coronavirus lockdown orders across many states and for consumers to feel safe returning to restaurants and shops.
Without revenue from its restaurants, Kura has tapped into cash reserves to pay rent and salaries of corporate employees and sushi chefs, but has furloughed its other restaurant staff, according to Jeremy Hamblin, an analyst at Craig-Hallum Capital Group LLC who tracks the company. The company had about $24 million in cash as of April 13, and access to a line of credit, according to its latest quarterly earnings report.
“The number of employees has to coincide with the amount of business activity, and a closed storefront can’t optimally employ anyone,” said Tom Arnold, a finance professor at the University of Richmond in Virginia. Asked whether the company was considering other options, Marc Cannon, a company spokesman, said: “None,” and pointed to the lack of forgivable loan programs.
His suggestion is for smaller companies giving back Paycheck Protection Program loans to negotiate a bank loan with flexible terms before returning the money, which is due by May 14.
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