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A new round of PPP loans are expected soon – here’s what restaurateurs need to know

Amber Leith
Head of Global Marketing

The U.S. Small Business Administration (SBA), in consultation with the Treasury Department, announced that the Paycheck Protection Program (PPP) will re-open the week of January 11 for new borrowers and certain existing PPP borrowers.

This round of PPP funding includes $284 billion in additional loans for eligible businesses through March 31, 2021 and also allows some previous PPP borrowers the chance to apply for a Second Draw PPP Loan.

The announcement also included a key update that allows PPP borrowers to cover additional expenses that were not included in the first round. This flexibility in spending will make it easier for all small businesses, including restaurants, to use the funds in the areas they need most.

Here’s an overview of what’s changed since the last round of PPP loans and a look at how restaurant owners can benefit.

How is the new PPP loan different from the last one?

Along with increased funding, this round of PPP funding has a great emphasis on supporting small businesses. Here’s a look at the key changes to the new PPP loans:

  • PPP borrowers can set their PPP loan’s covered period to be any length between eight and 24 weeks to best meet their business needs;
  • PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures;
  • The Program’s eligibility is expanded to include 501(c)(6)s, housing cooperatives, direct marketing organizations, among other types of organizations;
  • The PPP provides greater flexibility for seasonal employees;
  • Certain existing PPP borrowers can request to modify their First Draw PPP Loan amount; and
  • Certain existing PPP borrowers are now eligible to apply for a Second Draw PPP Loan. 

Funding can also be used in more ways – including covering operations costs, coverage for software and cloud expenditures, as well rent and payroll. These new guidelines will make it easier for small businesses to stay afloat and prepare themselves for possible re-opening as vaccines rollout this year.

Who is eligible for the new PPP loan?

Funding is available for both first-time applicants and returning borrowers. Businesses that received a PPP loan during the first round of funding can now apply for what’s known as a “second draw,” provided that:

  • They are not a publicly traded company and employ no more than 300 people
  • They have fully used or have allocated the funds from their first PPP loan for authorized purposes only
  • They can show proof of at least a 25% drop in gross receipts between comparable quarters in 2019 and 2020

How does the new PPP loan impact restaurateurs?

Restaurants have been hit hard by COVID-19 and this round of PPP funding specifically addresses some of the major worries plaguing business owners. Here’s a quick look at three key ways the new Paycheck Protection Program funding will benefit the food and beverage industry.

Bigger loans available for restaurant owners

Just like before, most eligible businesses are still only able to apply for a loan equal to 2.5 times their average monthly payroll. This time around business owners in the restaurant and hotel industries can apply for loans up to 3.5 times their monthly payroll. This change can be used to improve job retention and run operational costs. The upper limit of total amount available per business, however, has changed from the previous cap of $10 million, down to $2 million.

Increased flexibility in how you can spend your PPP loan

For any PPP loan to be fully forgiven, business owners must spend at least 60% of the money on payroll expenses. However, the remaining 40% of funds can be used to cover a broader scope than previously allowed. Along with covering mortgage rates, rent, and utilities, PPP funding can also be used to cover the cost of supplier and operational costs.

This includes software fees for restaurant point-of-sale systems and other expenses needed to meet COVID restrictions. Not only can business owners use these funds to pay for any software, cloud computing, and other human resources and accounting needs, but these expenditures will also be fully forgiven provided the business complies with any additional terms of their PPP.

Larger tax breaks for PPP loan recipients

All PPP loans available are given to recipients tax-free, provided they’re used for authorized purposes. And while 60% of those funds must be used for payroll expenses, that might end up working in the favor of small business owners. Businesses normally deduct payroll and operating expenses from their gross income, but now, even if those expenses were largely covered by the PPP loan, they are still allowed to be included as itemized deductions. This is a huge benefit for restauranters as it allows them to lower the out-of-pocket cost of running their business, while recouping some of their lost revenue in tax breaks.

Looking Forward with Oracle

Investing in a cloud-based point-of-sale software solution allows your business to connect with customers safely and securely. From reimagining your revenue growth to rebuilding teams and processes, Oracle has the technology to help you get the job done. If you’re interested in speaking to one of our experts, our team is standing by to answer any questions you may have about the right solution for your restaurant. Reach us by phone: US: +1 866-287-4736; UK: +44 207 5626 827; AU: 1300 366 386; LAD: 52 559 178 3146) | chat | or request a call back.

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