Every week we comb through the news to find employment trends affecting the hospitality industry so you don’t have to. This week’s topic: what the second round of the PPP loans mean for restaurants.
In March 2020, the Paycheck Protection Program (PPP) was launched under the CARES Act, whose purpose was to put money in the hands of businesses who were forced to shut down or limit operations due to the pandemic. This loan was intended to cover employee payroll to prevent mass layoffs, and could be fully forgiven if the business spent at least 60% loan payment on payroll costs.
The initial run of the program was met with mixed feedback. On one hand, some businesses were able to secure a loan (with only 8% of those being in the hotel and foodservice industries); on the other hand, huge corporate brands like Taco Bell were eligible and able to cash in, causing concern over who the program was intended for.
Second Round of PPP Loans
Fortunately, another PPP was passed by congress through the Coronavirus Response and Relief Supplemental Appropriations Act. There are several differences between the first and second programs; where the first program’s eligibility was more broad, the second aims to target small businesses and hospitality venues – the industries that are suffering the most during the pandemic.
According to Forbes and the U.S. Small Business Administration, the following are required in order to be eligible for the second round (referred to as “second draw”) PPP loans:
- The borrower must certify that the loan is “necessary” to the survival of the business.
- If the business received the first draw PPP loan, they have or will have spent the full amount on authorized uses before receiving the second draw.
- The business must have 300 employees or less.
- The borrower can demonstrate at least a 25% loss in gross receipts for any quarter in 2020 (compared to the same quarter in 2019).
Below, we cover some of the key differences between the first and second draw PPP that directly effects the restaurant industry.
- Round two of the PPP loans expanded its’ allowable uses to now include “protective personal equipment (PPE), cleaning products and services, reconfiguration of spaces to enable social distancing, and supplier costs.” For example, a restaurant could put some of its’ loan towards expansion for outdoor seating, or installing a drive-thru window.
- For eligible restaurants, the second draw loan is larger.
- Restaurants who are temporarily closed can still apply.
Ideally, the goal of the PPP loans is to allow restaurants and small businesses to last through what’s proving to be a tough winter. If you’re eligible for the loan, registration is open now through March 31. Click here to learn more about eligibility requirements and how to apply.