What Restaurants Need to Know About the Paycheck Protection Program (PPP)

Late last week, the U.S. Small Business Administration Administration launched the Paycheck Protection Program, (PPP) a $349 billion emergency loan program created as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES). The program provides forgivable loans up to $10 million to small businesses left financially distressed by the Coronavirus (COVID-19) pandemic. The loans, which will be administered at the local level by a national network of banks and credit unions, are designed to maintain the viability of millions of small businesses struggling to meet payroll and day-to-day operating expenses.

“These loans will bring immediate economic relief and eight weeks of financial certainty to millions of small businesses and their employees,” SBA Administrator Jovita Carranza said. “We urge every struggling small business to take advantage of this unprecedented federal resource – their viability is critically important to their employees, their community, and the country.”

The loans, which are 100 percent backed by SBA, are being provided to small businesses without collateral requirements, personal guarantees, SBA fees, or credit elsewhere tests. Those eligible for the program include small businesses, certain non-profits, veterans’ organizations, self-employed individuals, independent contractors, and other businesses meeting size standards based on their North American Industry Classification System code.

The Paycheck Protection Program’s maximum loan amount is $10 million with a fixed one percent interest rate and maturity of two years.

The loans are available to cover up to eight weeks of average monthly payroll (based on 2019 figures) plus 25 percent and payments are deferred for six months (interest does accrue). The SBA will forgive the portion of loan proceeds used for payroll costs and other designated operating expenses for up to eight weeks, provided at least 75 percent of loan proceeds are used for payroll costs.

Eligible expenses for the eight-week forgiveness include:

  • Payroll costs (excluding the prorated portion of any compensation above $100,000 per year for any person. Payroll costs include salary, commissions, tips; certain employee benefits including sick leave and health care premiums, and state and local taxes;
  • Mortgage interest (not prepayment or principal payments) and rent payments on mortgages and leases in existence after February 15, 2020;
  • Utilities such as electricity, gas, water, transportation, phone and internet access for services that began before February 15, 2020; and
  • Additional wages paid to tipped employees.

To learn more,  go to www.SBA.gov/Coronavirus.

Modern Restaurant Management (MRM) magazine reached out to the SBA to learn about best practices for working with them.  Below are responses from Mark C. Ihenacho, Public Affairs Supervisor, Field Operations Center East.

What is the best advice on how to complete the necessary forms and work with SBA? What information should they gather together before starting the process?

Visit sba.gov/disaster and apply online using SBA’s Electronic Loan Application.  SBA needs certain documentation to capture the business’ information, liabilities and relevant financial data, including liabilities.  Examples of the type of documents that may be needed are (depending on the specific situation of the business): signed and dated SBA application Form 5, IRS Tax Authorization form, copies of the most recent federal tax return (2018), a personal financial statement and schedule of liabilities. 

Are there good times to access the site due to increased traffic?

SBA is making daily improvements to meet the demands of hundreds of thousands of small business owners visiting the website to access SBA’s resources.  We are encouraging people to visit the site anytime, especially during off peak hours.

 What are common mistakes those applying for SBA relief make in their forms that cause delays or rejections?

 They should remember to sign and date the SBA application and IRS forms, and submit the required documents.   

 Due to this unprecedented outbreak, has the approval process changed or lengthened? What can they expect after the form is submitted?

 SBA has streamlined the loan application process for faster decisions and quicker disbursements of working capital disaster loan funds. They will receive an acknowledgement upon submitting their application.  A Loan Officer will contact them soon to discuss their application.      

Are there common misconceptions about SBA you'd like to dispel?

 The process is quicker.  The SBA started approving Economic Injury working capital disaster loans for small businesses last week, about three days after applications were submitted.  We encourage small businesses and nonprofits to submit their applications as quickly as possible.  

The Independent Restaurant Coalition, which includes nearly 11,000 members, including chefs and independent restaurant owners from across the country,  feels short-term relief made available through the Paycheck Protection Program in the CARES Act will be insufficient to ensure independent restaurants can stay open and continue to employ over 11 million workers.

"The unprecedented rise in unemployment is shocking, but those of us who work in restaurants are not surprised. Unemployment claims will continue to increase the longer restaurants are unable to open," the organization issued in a statement. "There are over two million waiters and waitresses, 261,000 dishwashers, and 296,000 hosts and hostesses in America, and every restaurant that shuts its doors leaves them out of a job.  Not to mention, we employ tens of millions more Americans through a vast supply chain of other local businesses, including farmers, fishermen, beverage distributors, linen services, and so many others. 

"In the last Department of Labor report, 20 states specifically noted an increase in claims in the food service industry, and four of the five states with the greatest increase in unemployment claims are among the top six employers of restaurant employees in the country.  Restaurants are the lifeblood of our communities and our economy, and more must be done to ensure millions of claimants have jobs to return to when the crisis is over. Restaurant owners should visit www.SaveRestaurants.com for more information on how to apply for relief." 

PPP Resources 

NCR Corporation announced an agreement with NYMBUS to assist small businesses impacted by COVID-19 with accessing Small Business Administration (SBA) Paycheck Protection loans. The NYMBUS SmartLoans platform provides end to end full service loan processing which allows every SBA approved bank in the United States to rapidly submit SBA applications on behalf of their customers without the overhead normally required.

“Small and medium sized businesses, in particular restaurants, are scrambling to navigate the impact of business disruptions during the coronavirus outbreak,” said Dirk Izzo, president of NCR Hospitality. “We’re committed to helping our small and medium sized business customers keep commerce running and navigate this difficult time—including facilitating access to much-needed financial support.” 

“The most difficult part of getting small businesses help is access to the loans without the traditional overhead on lenders,” said David Mitchell, President of NYMBUS. “The NYMBUS SmartLenders turnkey loan outsourcing platform allows our bank partners to immediately process a much higher volume of loans without needing to adjust their systems to do so. The NCR and NYMBUS team puts together the borrowers and lenders at a faster pace. Our joint vision is to help our communities as fast as we can. Banks wishing to join forces with NYMBUS and NCR to help small businesses through this program should contact us immediately.”

NCR has additional resources for businesses. Click here for more. 

Mazars has released Paycheck Protection Program “PPP” Analysis Tool. The team developed an essential analysis tool that can help all small businesses. It makes applying for the PPP simple and helps you maximize a company’s loan forgiveness.   Click here to learn more about the PPP Analysis Tool and here to learn more about other COVID-19 pandemic assistance services.

SevenRooms is providing a comprehensive PPP Loan Forgiveness Calculator for restaurants that their team pulled together. Anyone can use it — they simply need to make a copy of the Google Sheet. 

Rewards Network compiled a guide titled Restaurants' COVID-19 Emergency Loan Guide to help restaurant owners navigate the CARES Act to make very important decisions quickly to receive needed funds to survive. 

The guide breaks down the bill, cites sources, explains how to go about calculating your loan amount, and breaks down forgiveness terms.

It is focused on two key programs:

1) Paycheck Protection Program

2) Economic Injury Disaster Loan Program

Both programs service specific needs and can be used for different business needs. The guide is intended to serve as a resource as restaurants discuss options with attorneys and accountants as they consider whether to apply for one of these loans.