Galen Fletcher counts himself among the lucky ones.

The owner of Palo Alto's longtime Sundance the Steakhouse actually received a $668,000 loan through the federal Paycheck Protection Program this week, a "lifeline" that will allow him to pay his mostly laid-off staff through mid-June.

Fletcher's not the only Peninsula restaurant owner to get approved for a loan through the much-needed but quickly depleted federal fund. But many other restaurateurs described a chaotic, unsuccessful application process that left them in the lurch as they try to keep their businesses afloat during the shutdown.

What made the biggest difference? Their bank.

Restaurant owners who applied through small, local banks or credit unions said they experienced a smoother, more successful process.

"Without that banking relationship, I'd still probably be in outer space as far as my application," said Fletcher, who worked with First Republic Bank.

The $349 billion Paycheck Protection Program was supposed to function as the lifeline Fletcher described, helping millions of small businesses to pay their employees during the unprecedented coronavirus crisis. The loans are forgivable if all employees are kept on payroll for eight weeks and at least 75% of the forgiven amount is used for payroll.

Fletcher said First Republic, after initially wavering on whether it would participate in the federal program, created an online portal where he uploaded all the necessary information, including tax returns and payroll registers. Business owners could apply for up to 2.5 times their monthly payroll costs. The bank used a third party small business lender, Spark, as the liaison to the U.S. Small Business Administration. His banker was responsive, including sending email updates at 3 a.m. Within about a week, Fletcher was signing the loan documents.

"It was a game changer," he said of the funds. "I'll be honest with you: I'm not sure what we would do if we didn't get that loan."

Anne Le Ziblatt, who opened Nam Brasserie in Redwood City barely three weeks before the stay-at-home order took effect, said she worked with a local small business lender and was set to receive her loan this week.

"The service was very personalized," she said, which contrasts sharply with other owners' descriptions of confusing requirements and spotty communication from big banks like Wells Fargo and Bank of America. The loan will allow her to bring more staff back to help the "skeletal crew," including Le Ziblatt, who have been serving takeout out of Nam.

Timber & Salt, a small restaurant and bar in Redwood City, received a $160,000 PPP loan earlier this month. Owner Stewart Putney also applied through First Republic and said the process was straightforward, albeit stressful, and took about 10 days from start to finish.

"We are currently working out how to rehire laid-off staff in a way that both helps the employees and gives the restaurant the most cash runway. It seems unlikely to us that we will be able to 'fully reopen' (whatever that means) in two months, so we have to manage the PPP cash carefully," Putney wrote in an email. "The last thing we want to do is rehire our core staff and then have to lay them off again."

Even the lucky restaurant owners who received federal funds are now faced with a risky cost analysis. The Small Business Administration has said loan forgiveness is "based on the employer maintaining or quickly rehiring employees and maintaining salary levels" — an unrealistic proposition for restaurants in particular. It's not yet clear when restaurants will be able to reopen their dining rooms, in what form and how willing the public will be to return. Gov. Gavin Newsom recently said restaurants could be required to operate at half capacity, with gloved and masked staff checking customers' temperatures at the door.

"You can't have 50% reduction in your revenues and hire back 75% of your staff," said Tim Stannard, founding partner of Bacchus Management Group. "That's a recipe for bankruptcy."

Bacchus Management Group, which operates The Village Pub and Village Bakery in Woodside, Mayfield Bakery & Cafe in Palo Alto and Selby's in Redwood City, has been approved for PPP loans for some but not yet all of its 10 restaurants. They, too, applied through First Republic and had a positive experience, Stannard said.

After the stay-at-home order, Bacchus laid off nearly all of its 900 employees. Just 50 staff are still working to keep takeout and delivery going. The company is using the proceeds to help employees pay rent and medical bills or put food on the table for their families, Stannard said.

But Stannard is wary of using the federal funds to hire more staff back because he's been unable to get a definitive answer from his bank or the Small Business Administration about how the loan forgiveness will be calculated.

"There is no definitive memorandum yet from the treasury outlining exactly how the banks are supposed to calculate these things. You get notifications from the bank like, 'Use with extreme caution,'" he said. "It becomes a bit of a dangerous tool for us."

Adam Simpson, a partner at Wursthall in San Mateo, said he doesn't know if they would use the relief loan even if they received one (they haven't). Wursthall fully closed in early April after offering takeout for several weeks.

"It's kind of playing with fire. It's very unsustainable to be able to pay your payroll when you have zero work for (employees)," Simpson said. "As much as we want to preserve jobs … if we don't have food to make, customers to serve, there's no reason to bring back employees just for the sake of bringing them back."

Putney noted that owners can choose to use their loan in different ways than prescribed but then lose out on the forgiveness.

"In many high rent locales the operators will have to use more than 25% of funds to cover rent, and that part of the PPP loan may not be forgiven," he said. "Some operators may choose to hire 50% of their staff back and use the rest of the PPP funds as a cash runway and then only get half of the loan forgiven. Cash is king in days like these, so most operators will have to make tough choices."

Most owners interviewed for this story said they also have applied for but not yet received $10,000 economic injury disaster loans, which the Small Business Administration said are being processed on a first-come, first-served basis.

Surviving without federal assistance

Ted Kim, the owner of Steins Beer Garden in Mountain View and Cupertino, "watched with anxiety" on April 3 as banks reportedly submitted billions in loans the first day applications opened for the Paycheck Protection Program. His bank, Wells Fargo, hadn't yet opened its promised online portal to allow small businesses impacted by the coronavirus to apply for federal relief. After the news that Wells Fargo had hit a $10 billion lending cap, Kim scrambled to find a new bank — none were taking on new customers — but he finally found two third-party lending companies willing to take his application for a $500,000 loan.

Then, on April 14, Wells Fargo notified customers that the bank would again be taking applications. Kim filed his paperwork early the next day, April 15. On April 16, the government announced the small business relief fund had been exhausted. Kim and his 100 employees were out of luck, while the news broke that national restaurant chains had received multimillion-dollar loans.

"In a word, the experience has been maddening," Kim said. "If no more money is available it doesn't look good for us. I'm looking for alternate means to get a cash injection but realistically, these stimulus loans are our best hope."

Both the Senate and the House have since passed a new stimulus package that includes $320 billion for the small business loans, with $60 billion set aside for smaller lending institutions. (Applications open on Monday morning, April 27.) The National Restaurant Association is also lobbying for Congress to create a $240 billion emergency fund for the restaurant industry to "support ongoing operating expenses and debt obligations from government-mandated closures; rehire and retrain our workforce; and

provide a lifeline to reopen and readjust to a new era of increased distancing and heightened health and safety standards."

The owners of Oren's Hummus filed for a $1.5 million PPP loan the first day applications opened, co-owner Mistie Cohen said. They have been in constant contact with their bank, but did not get approved in the first round. Oren's has furloughed 70% of more than 200 employees across its five Bay Area locations, four of which remain open for takeout during the shutdown.

"Without these funds we will struggle on how and if we will reopen all locations," she said. "Rents like San Francisco, where we are paying $33,000 (a month), will be impossible. Without the PPP funds we will struggle on keeping operations going and employing our team again."

Nancy Coupal, co-owner of Coupa Cafe, also applied through Wells Fargo. Because of delays from the bank, she wasn't able to apply until April 15, nearly two weeks after the federal relief program launched — and two days before the fund would run out. (Wells Fargo and several other big banks are now facing lawsuits alleging they prioritized borrowers seeking larger loan amounts instead of processing them on a first-come, first-served basis.)

"How do you think small businesses can survive with the impossible dream of receiving PPP funds?" she asked. "It will be up to the small business owner to figure out how to stay alive with no financial help."

Menlo Park's longtime Cafe Borrone launched a GoFundMe campaign this week to ask for community donations while it's closed indefinitely, noting that the restaurant has not received federal assistance.

"With no way to generate income for an extended period of time, our cash reserve has dwindled to next to nothing. I am doing everything in my power to generate funds and get assistance, but as you've likely seen has happened to many independent restaurants on the news, we did not receive any assistance from the PPP loan, and other avenues we are pursuing for loans have also not materialized," wrote Marina Borrone, whose parents opened the local institution in 1979.

Other owners working long days in their restaurants simply couldn't get their applications in soon enough before the fund was depleted. The Small Business Administration originally said the program would accept applications through June 30.

"I have to be at the restaurant to ensure survival so (I) couldn't submit early enough to get the loan," said Zareen Khan of Zareen's in Palo Alto and Mountain View. "Bigger businesses with HR departments and legal counsel were able to apply very quickly, but smaller businesses for which this loan is much more needed took a few days longer and now face the probability of not getting help on time."

Independent restaurateurs also bristled at the news that several chains received large federal loans while so many small businesses went unfunded. Burger chain Shake Shack, a publicly traded company with more than 200 international locations, including in Palo Alto, returned its $10 million loan after widespread public backlash, prompting other chains that received funds to follow suit.

"I think it's the right call to send those funds back, but I think the better call would have been to abstain from this to begin with," said Greg Kuzia-Carmel, chef-partner at Camper in Menlo Park. "Imagine going to a pizza party and one person hoards three pizzas all to themselves.

If they bring them back the next day, that's not necessarily the same situation as having enough to share at the time of need."

He and other owners said there should have been a "triage" approach to the federal relief, putting smaller restaurants ahead of chains with deeper pockets.

Shake Shack also advocated for sending businesses with limited access to outside funding "to the front of the PPP line" and assigning every applying restaurant a local bank that would be responsible for executing the loan.

"With adequate funding and some necessary tweaks, the PPP program can provide the economic spark the entire industry needs to get back in business," Shake Shack founder Danny Meyer and CEO Randy Garutti said in an announcement.

In new guidance released Thursday, the U.S. Treasury said that "it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith" and asked any restaurants of that nature that already received loans to return them by May 7.

A reckoning for the restaurant industry

Despite the hardships local restaurants are facing, owners said they hope the shutdown will spark a long-needed "reckoning" for their industry. In the Bay Area, many raised the alarm pre-coronavirus about the existential threat that skyrocketing cost of living and labor costs posed to their businesses, which already operate on razor-thin profit margins.

"People are recognizing how important this industry is for normal, everyday life," Simpson said. "This industry has been due for a little bit of a reckoning. … If we can start looking at why PPP is broken and why it doesn't work for restaurants, you can look at the larger picture when or if we get out of COVID as to how to make things more sustainable for us."

He said a reassessment of minimum wage rates and relaxed Alcohol Beverage Control requirements that could allow restaurants to serve alcohol outside their dining rooms, for example, would provide relief.

Mayfield Bakery & Cafe's dining room, outdoor patio and next-door bakery at Town & Country Village are well-frequented during normal times. But Stannard said it's unlikely Mayfield will reopen after the shutdown due to higher rent, utilities surcharge and minimum wage in Palo Alto in particular.

"If the environment is a 50% reduction in capacity, it's difficult for me to see a pathway in a town like Palo Alto given all the other challenges that Palo Alto puts in the way of small businesses. It's very difficult for me to see that restaurant coming back," he said.

Stannard has run some of the Peninsula's most popular restaurants for the last 20 years. He said he's more busy now even than when the restaurants were open, working to find additional capital to ensure their future reopening in case government assistance doesn't pan out. He also sees a reckoning on the horizon.

"The reality is that the old models for restaurants, which were under severe stress already, now are going to be required to change," Stannard said. "This certainly just speeds up the process."

Find comprehensive coverage on the Midpeninsula's response to the new coronavirus by Palo Alto Online, the Mountain View Voice and the Almanac here.