Kelly Hart's Dive Bar the Righteous Room
Photo by Calvin Florian

Dive Bars Need PPP Loans to Survive—But Big Chains Sucked the Fund Dry

Corporations took millions from a program designed to help small businesses. Without that money, dives across the country are at risk of closing permanently.
Drew Schwartz
Brooklyn, US

When the Small Business Administration unveiled the Paycheck Protection Program, Robert Perry, who owns Tattooed Mom, a dive bar in Philadelphia, spent a week scrambling to put together his paperwork to file for it. He submitted his application on the very first day the SBA began accepting them—only to soon find out that, somehow, the entirety of the $349 billion PPP fund had already been exhausted.


That money ran dry in just two weeks. Though it was supposed to go to small, independently owned businesses like Perry’s, huge sums were sucked up by corporations. An AP investigation found that $365 million from the PPP fund went to publicly traded companies. Potbelly, a sandwich chain with more than 450 locations in five countries, got a $10 million loan. Ruth’s Chris Steak House, which is valued at $250 million, got two of them. But Perry got nothing.

"This help through PPP is going to be the difference between life and death for me," Perry told VICE. "Without it, it will make it significantly harder to stay in the game."

Of all the service industry businesses that have been battered by COVID-19, dive bars are in a uniquely vulnerable position. Unlike restaurants, which can generate at least some revenue through take-out and delivery, most dives don’t serve food. Where upscale cocktail bars might have backing from an investor, dives don’t. Facing months of forced closure without any way to make money, dives across the country have looked to forgivable PPP loans as their only hope of survival. But for many, that hope is fading fast.

Perry is just one of thousands of small business owners who were told that even though they’d successfully applied for a PPP loan, the program had run out of funding. The same thing happened to Mark Van Gessel, the owner of Hinano Cafe, a dive bar in Venice, Calif.


"I'm hugely dependent on this loan," Van Gessel said. "Corporations like Shake Shack and Ruth's Chris are taking the money that should be helping me. It upsets me greatly that they would even have the gall to apply."

Those corporations were never supposed to be able to. Initially, PPP loans were designed for businesses with fewer than 500 employees—but as a result of lobbying from powerful restaurant and hotel groups, Congress expanded the measure, allowing individual franchises of a national chain to qualify. Corporations that exploited the loophole have faced intense backlash, and some, like Shake Shack and Ruth’s Chris, have returned their loans. Public scrutiny led the SBA to issue new guidelines that, it says, will make it "unlikely" for publicly traded companies to receive the funding. But those guidelines are just that: guidelines. They don’t force corporations that have taken PPP loans to give them back. They don’t guarantee that corporations won’t just exploit the PPP fund again, now that Congress has passed a bill to inject another $310 billion into it.

The second round of PPP funding is expected to dry up even faster than the first; experts say it could be gone within days. If Perry and Van Gessel don’t receive any of it, their bars could shutter, while chains like Potbelly benefit from the funding that would have kept them alive.

"The Small Business Administration—the keyword there is 'small,'" Perry said. "And if there's a clear definition of what ‘small business’ means, then we should adhere to that, and it should be strictly enforced."

Robert Perry

Robert Perry at his bar, Tattooed Mom

Bars like Tattooed Mom aren’t asking for $10 million from the SBA. For most dives, even $100,000 would be enough to tide them over while they remain closed for the next few months. That single $10 million payout to Potbelly could save 100 dive bars. If the $365 million in PPP funding given to publicly traded companies were instead split amongst America’s struggling dives, there’s no telling how many of them could have been rescued.

"You're going to have a lot of closures, a lot of people out of work," Sergio Jaimes, who co-owns Chicago’s Whirlaway Lounge, told VICE. "That's a huge reason these places would close: You had someone taking a huge chunk away from where it actually deserves to go."

Jaimes didn’t apply for a PPP loan. He and his mother own their bar outright. Despite the fact that his wife is expecting, he’s still paying the mortgage on his house, and he has a $1,400 private health insurance bill to cover each month, he knows that without the need to pay rent on Whirlaway, there are bars out there that could use the money more than him.

"I'm sure there's gonna be a limited amount, and I don't want to stick my hand in the cookie jar if I don't need that extra cookie," Jaimes said. "And then you’ve got these major businesses taking chunks. It’s disgusting."

Frank Scotto, who owns Clockwork in New York City, told VICE he didn’t apply for a PPP loan either. He has enough saved up, he said, to keep his bar afloat for a few months.


"If I'm able to open, and I can survive, I'm not pissed off I didn't get it. I'm pissed off that the bar next to me didn't get it," he said. "If Beverly's doesn't make it through this, that's another shuttered window on the block. I feel lucky going through this, but it 100 percent really pisses me off. Because we haven't learned anything since [the financial crisis] ten years ago. It's the same thing: It's the rich that get it first."

Under the terms of the PPP, banks were supposed to submit loan applications on a first-come, first-served basis. But Bank of America, Wells Fargo, JPMorgan Chase, and US Bank have been accused of "reshuffling" the loan applications they received, filing on behalf of their biggest clients first, which earn the banks bigger fees. The banks have all either denied the allegation or declined to comment on it. But a lawsuit filed in California earlier this week cites SBA data that, it says, shows the banks fast-tracked applications that would net the highest loan amounts.

"You're Wells Fargo: Who are you going to save? Are you going to save the $40 million a month that comes in from credit card payments through Shake Shack, or Potbelly, or Ruth's Chris? Or are you going to go out of your way to file the same paperwork, all the same pages, for Clockwork, and save one account that processes $250,000 a year with you?" Scotto said. "It's just much easier to make a one-time, $10 million loan to Ruth's Chris Steakhouse than it is to make a $15,000 loan to Clockwork. Of course that’s what they did. They reshuffled the deck, and they gave it out to them."


The SBA’s new guidelines for PPP loans don’t include any added emphasis on processing applications on a first-come, first-serve basis. And while they’re ostensibly designed to make it "unlikely" for corporations to benefit from the program, the guidelines explicitly state that franchises of some national chains still qualify. Even if you have more than 500 employees, you may be eligible for a small-business loan.

Kelly Hart, who co-owns the Righteous Room in Atlanta, managed to secure a PPP loan. It’s been indispensable in ensuring that her bar makes it through the shutdown, she said; the loan covers all of her employees’ wages and at least three months of rent on the bar. Still, she’s incensed that large corporations have been able to benefit from the program.

"It really does help the true, small local business, and they're taking millions of dollars out of that fund," she said. "I can't blame people for trying to get a hold of the money. I honestly more so blame the government for letting those people have those loans. How does that happen? How does the government allow that?"

Hinano Cafe

Photo of Hinano Cafe by Carey Reisz

Van Gessel filed his application for a PPP loan through Bank of America on April 3, the first day the SBA began accepting them. He was told his application went through. But this Thursday, he said, Bank of America informed him that wasn’t actually the case. Instead, they told him his application is now "ready to submit"—leaving Hinano Cafe far behind other small businesses with their applications already in the pipeline, and that much more unlikely to get a PPP loan. If he doesn’t receive it, he said, after being open for 56 years, his bar may have to close.

"Hinano has become a Venice staple. The patrons have become like family, as have the staff. Old and young are all able to get along, there's no issue with color, race, people type—it's one of the few places that is truly the mixing pot that Venice has always been," Van Gessel said. "To see that go away, and then potentially get reopened by a corporation that has easy access to large loans, would be devastating."

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