As of December 27th, 2020 the Paycheck Protection Program is back, and Biz2Credit can get your business started with an easy process to help you get funded quickly.
COVID-19 has had a disastrous impact in the United States—on the economy, on Americans, and on the small business community. Many small business owners have been forced to shutdown, shut their doors, or dramatically reduce their business operations to comply with safety protocols. And while small businesses of all types have been negatively impacted by the pandemic, there’s one industry that’s been hit particularly hard—and that’s the restaurant industry.
Restaurants have been among the hardest hit businesses during the coronavirus pandemic. Indoor dining has been prohibited for much of the year, which put many restaurants out of businesses—and even restaurants that were able to pivot to focus on outdoor dining, takeout, and delivery are struggling to make up for lost revenue. And today, as COVID continues to pose serious health challenges into 2021, many restaurants have been forced to close—and have no idea when they’ll be able to reopen safely.
When, in March, as part of the CARES Act, the U.S. Small Business Administration, launched the Paycheck Protection Program (PPP), it provided financial assistance in the form of forgivable loans to restaurants across the country—but unfortunately, the loan program wasn’t tailored to the specific needs of the restaurant industry and failed to provide the type of support necessary to keep restaurants moving forward in the face of the pandemic.
But then Congress recently passed the $900 billion COVID-19 relief package, which includes a number of items that directly impact the restaurant industry—and provides some much-needed relief to restaurant owners.
Let’s take a look into the new stimulus bill—and, more specifically, how the stimulus package is poised to provide the support restaurant owners need to support their workers and keep their businesses moving forward through the pandemic and into the new year:
How does the new COVID-19 relief bill help restaurant owners?
The new COVID-19 relief bill provides support to restaurant owners in a few different ways, including:
Second round of PPP
The new legislation includes an additional $284 billion to replenish the Paycheck Protection Program and provide an additional round of PPP to borrowers—including borrowers that already receive PPP loans during the program’s first round.
The rules for this second round of PPP are similar to the first; as long as proceeds are used to cover approved expenses (including payroll costs and eligible nonpayroll costs, like rent and utilities) during the covered period (either eight weeks or 24 weeks), up to 100 percent of the loan amount will qualify for loan forgiveness.
So, now that the new relief bill has passed, restaurant owners can apply for another PPP loan—and get the funding they need to keep their businesses moving forward.
Increased PPP funding for restaurants
The fact that the Paycheck Protection Program is being replenished is a huge benefit to restaurant owners. But there are a few changes to the program that directly benefit the restaurant industry—starting with how much restaurants are able to borrow.
For this second PPP draw, restaurant owners can apply for a loan of up 3.5 times their monthly payroll costs for a maximum of $2 million—while other industries are only eligible for 2.5x monthly payroll.
Employee cap adjustment
The aim of the Paycheck Protection Program is to ensure that loans go to small businesses—and in order to ensure that happens, the program has an employee cap to prevent large corporations from securing loans.
But that employee cap has been adjusted for restaurant owners; under the new legislation, the maximum number of employees for restaurants is capped at 300 employees per location—compared to the 300 employees total for other industries.
Expanded definition of “eligible nonpayroll costs”
During the first round of PPP, there were very strict guidelines on what qualified as an eligible nonpayroll expense. This included:
- Mortgage interest
The new relief package expands on what qualifies as an eligible nonpayroll costs—and includes things like personal protective equipment (PPE), cleaning products, professional cleaning services, supplier costs for perishable food items, and any expenses incurred in changing the restaurant to comply with social distancing guidelines.
Extended tax credits
The new round of COVID-19 relief also includes tax credits that could help restaurant owners.
Employee Retention Tax Credits (ERTC) will be available for the first quarter and second quarter of 2021. ERTCs will allow certain employers to take a tax credit of up to $7000 per eligible employee that they retain during those quarters. (Employers that receive PPP loans may still qualify for ERTCs—as long as the wages weren’t paid using forgiven PPP loan funds.)
In addition, the Work Opportunity Tax Credit (WOTC) has been extended for the next five years—and will provide tax credits to restaurants that employ workers from target groups.
Business meal deduction
Under the new COVID-19 relief package, business meals are 100 percent deductible for 2021 and 2022—which could prove helpful for restaurant owners.
The new COVID-19 relief bill provides targeted support to restaurant owners—and will hopefully be the support the restaurant industry needs to continue moving forward
The new COVID-19 relief package offers much-needed support for the restaurant industry. Under the new legislation, restaurant owners can qualify for PPP loans that cover a higher ratio of their payroll expenses, use PPP loan proceeds to cover a wider variety of nonpayroll expenses, deduct 100 percent of their business meal expenses for the next two years, and qualify for extended tax credits. Hopefully, this legislation will get restaurants the financial support they need to keep their businesses moving forward into 2021—and keep them moving forward through the end of the pandemic.