The Restaurant Industry's $284 Billion Lifeline

The U.S. Small Business Administration re-opened on the Paycheck Protection Program (PPP) this week for new borrowers and certain previous borrowers. This revamped PPP makes $284B available to small businesses providing a lifeline for the industry.

Smaller borrowers who never received PPP financing will be first in line to apply and submit their applications starting Wednesday January 12th, and soon thereafter, the Small Business Administration will open the program to all businesses with a maximum of 300 employees compared to the 500-employee limit in last year’s program. One of the big complaints last year was that not enough small businesses were able to get any of the funds, so this time around, more small businesses should get the help they so desperately need.

What You Need to Know

Here are the main highlights of the PPP 2.0:

  • For the load to be forgivable, recipients must abide by the program rules, if not, borrowers will have to pay back the loans with interest.
  • 60% of the loan must go to fund payroll.
  • 40% of the loan can be used for other expenses like mortgage, rent, and utilities as well as new things like worker protection measures including outdoor-dining buildouts, sneeze guards, health screening, and drive-thru windows.
  • Loans under $150,000 will have shortened and more simplified single-page loan applications to help small businesses that cannot afford outside resources to help fill out all the paperwork.
  • Loan sizes are calculated by multiplying 3.5 times the average monthly payroll based either on 2019 revenues or the one-year time period before the loan is dispersed.
  • Solo entrepreneurs can apply for PPP 2.0 with a loan calculation of 2.5 times net monthly profit – unfortunately, if you were not profitable, you won’t be eligible for any funds.
  • Businesses can use the loan funds from 8 weeks to 24 weeks.
  • Even businesses that have been temporarily closed can apply.
  • If you started a business after February 15, 2020, you will not be eligible to participate in the program.

You Can Apply for a Second PPP Loan

All bars and restaurants will be able to apply for a second PPP loan that is up to 40% larger than their initial loan provided they meet the following criteria:

  • They cannot be a publicly traded company.
  • Must be able to demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.
  • Must have fewer than 300 employees per location.

Emphasizing Help for Small Businesses

The encouraging news is that PPP 2.0 seems to be built with more of a genuine effort this time to ensure that loans make it to true small businesses without getting swallowed up or pushed out by the big guys like last time.

New provisions like the 300-employee limit, simplified application process for smaller loans, and funds set aside and earmarked only for specific recipient groups are helping to ensure that more smaller businesses and disadvantaged groups will be able to take advantage of this lifeline.

Time Is of the Essence

You are going to want to move on this very quickly. In the $350B PPP last April, all the funding was tapped out in less than two weeks, so important that you get your loan applications filled out correctly and get them turned in as soon as possible.

“The Paycheck Protection Program has successfully provided 5.2 million loans worth $525 billion to America’s small businesses, supporting more than 51 million jobs,” Secretary of the Treasury Steven Mnuchin said in a statement. “We are committed to implementing this round of PPP quickly to continue supporting American small businesses and their workers.”

Fourth PEO Customers

While we are working remotely, our team is available to answer your questions via phone or email. Please reach out to us directly for the necessary payroll reports and documentation required for the PPP program. If you would like to learn more about outsourcing payroll and human resource administration, click here. To speak to one of our experts, fill out the form at the bottom of the page. Stay tuned for more updates.

The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available here are for general informational purposes only. This information may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; and Fourth does not recommend or endorse the contents of the third-party sites. You should contact your attorney to obtain advice with respect to any particular legal matter.

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