PPP Funding for Restaurants Is Here

Revel Blog | Samantha Novick | February 17, 2021 |

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The following content was guest-authored by Samantha Novick, a content marketing writer covering business and finance for Funding Circle. Consider the following factors when Paycheck Protection Program funding for your restaurant. 

The Paycheck Protection Program (PPP) has returned! Congress revamped the program and is now offering $284 billion in PPP funding to small businesses hurt by the COVID-19 pandemic.

First-time borrowers get first dibs at the loans, but the new money also helps businesses in need of a second draw. Plus, select industries (restaurants, specifically) are getting unique accommodations, like loans up to 3.5 times their average monthly payroll costs.

PPP loans aren't like your ordinary run-of-the-mill restaurant business loans. These loans can be 100% forgivable, essentially making them government grants (aka—free money). However, the funds have to be spent appropriately for your restaurant to qualify.

Quick funding, large loan amounts, and the potential for 100% forgiveness make PPP loan funding a must-have for any restaurant in need. Interested to see if you qualify, and if so, for how much?

Let's get into all the nitty-gritty details below.

What Is a PPP Loan?

The Small Business Administration's (SBA) PPP loans are government-backed loans. SBA-approved lenders do the actual lending, but the U.S. government does the guaranteeing and forgiving. 

These loans have no application fees and require no personal guarantees or collateral. Plus, when used appropriately, these loans can be forgiven and essentially converted into non-taxable grants.

For PPP loans that can't be forgiven (for one reason or another), the maturity rate is five years with a fixed interest rate of 1%.

Do You Qualify for a PPP Loan?

First-Draw PPP Loans

If you didn't get a PPP loan in 2020, then your eligibility requirements include the following:

  • Your business began operating before February 15, 2020
  • Your business is still open (though it may be closed temporarily due to COVID-19)
  • You have 500 or fewer employees (or 500 or fewer employees per location, for businesses with multiple locations)

Second-Draw PPP Loans

If you've already received PPP funding, then you are eligible for a second draw if you meet the following criteria:

  • You've used up your original PPP loan
  • You can prove your business suffered a 25% or greater revenue reduction (comparing 2019 to 2020 annual gross revenue or a quarterly disparity)
  • Your business began operating before February 15, 2020
  • Your business is still open (though it may be closed temporarily due to COVID-19)
  • You have 300 or fewer employees (or 300 or fewer employees per location, for businesses with multiple locations)

How Much Funding Can You Get?

First-time draws can receive 2.5 times their monthly payroll costs (with a maximum of $10 million).

For second-time borrowers, SBA-approved lenders can loan general businesses their monthly average payroll cost in 2019 multiplied by 2.5 (up to a maximum of $2 million). 

However, businesses in certain industries (like food and accommodations) are eligible for 3.5 times your monthly average payroll costs (still with a maximum of $2 million).

What Can You Spend Your PPP Loan on?

Originally, PPP funding could only be used on payroll, rent, and utility expenses. However, PPP 2.0 loans have updated their eligible expenses and elaborated on existing ones. Here's how you can spend PPP loans now:

  • Payroll: Includes salaries, wages, tips, commissions, employee benefits, group insurance benefits, and paid leave. 
  • Rent: Includes payments on any rental property with a lease agreement that went into effect before February 15, 2020.
  • Interest payments: Includes interest payments for any mortgage obligations that went into effect before February 15, 2020.
  • Utility payments: Includes water, gas, electricity, transportation, telephone, and internet service fees for any agreement that went into effect before February 15, 2020.
  • Operations expenses: Includes payments for software, cloud computing, accounting, human resources, and remote workforce-enabling services.
  • Property-damage costs: Includes costs for damages incurred from 2020 public disturbances that your insurance didn't cover.
  • Supplier costs: Includes essential expenses incurred to a supplier before you obtained a PPP loan.
  • Worker protection expenditures: Includes costs for investments in protective equipment and workplace changes to help your business comply with safety guidelines. 

However, you must spend at least 60% of your PPP funding on payroll costs to be eligible for full loan forgiveness. The remaining 40% can be spent on other qualified expenses.

In addition, you'll need to comply with the following to qualify for full forgiveness:

  • Maintain staffing requirements: You'll need to maintain the number of employees you had on payroll before the COVID-19 pandemic. If you had to let employees go, you'll need to rehire them, hire new employees, or prove you've attempted to rehire employees.
  • Maintain salary requirements: You'll need to maintain at least 75% of your employee's total salary before the COVID-19 pandemic. If you've reduced pay or employee hours, you'll need to spend your PPP loan bumping it back up.

What's the Timeframe for Using Your PPP Loan?

You'll need to spend your Paycheck Protection Program funds within the 24-week covered period to qualify for forgiveness. This 24-week coverage begins on the day you receive your first payment from your lender—not necessarily when you sign the lease agreement.

Expenses made outside of this 24-week period won't be eligible for forgiveness.

How Do You Apply for a PPP Loan?

Use the SBA's Lender Match tool to find an SBA-approved lender. Some banks, credit unions, and lenders are limiting eligibility to businesses with whom they have a pre-existing relationship, so you may have to shop around a bit to find a lender.

Once you submit your application to a lender, the lender will send them to the SBA for approval. Assuming you meet SBA loan stipulations and get approved, your lender will work with you to start making loan deposits in your account.

PPP funding can be a lifesaver for restaurants, so don't wait to get the funding you need. Even if your business is running smoothly right now, it doesn't hurt to get (essentially) free restaurant financing to set yourself up for success moving forward.