Newest Round of PPP Funds More Advantageous for Restaurant Businesses

Updated January 25, 2021

At long last, Congress agreed on a new $900 billion stimulus package and the president signed it into law last week. Mercifully, it contains some help for restaurant businesses hurt by the pandemic, with the inclusion of funding for a second round of forgivable loans through the Paycheck Protection Program (PPP) for small businesses experiencing significant revenue losses.

This portion of the legislation, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the Act), restarts the Paycheck Protection Program (PPP), as administered by the Small Business Administration (SBA), provides borrowers with greater flexibility in using PPP loan proceeds and expands the types of expenses eligible for loan forgiveness.

Under the legislation, Congress passed $284 billion for another round of PPP loans. You can apply for one of these new forgivable loans, even if you received a PPP loan in 2020. However, you cannot get more than two PPP loans. Additionally, the stimulus packages features programmatic improvements to the PPP.

We’ve outlined the highlights of the newest round of Paycheck Protection Program loans, eligibility requirements, what expenses are forgiven, improvements over the original PPP loans, and what you should do immediately to take advantage of these loans.

Bear in mind that this information is based on the newly passed legislation. Check back for updates.

Highlights of Newest Round of PPP Loans

While the Act falls short of policies and comprehensive relief packages advocated by the National Restaurant Association to allow restaurants to survive the pandemic, and the Independent Restaurant Coalition says will only serve to “buy time for Congress to negotiate a more robust plan,” it does offer some relief for restaurant businesses.

For example, a major difference of the Paycheck Protection Program in this stimulus package is that any forgiveness of a PPP loan is not taxable as gross income. Also, allowable expenses paid by PPP loan funding may be deductible. The IRS had previously said that these expenses could generally not be claimed as deductions, but Congress overruled that IRS position in the new legislation.

Additionally, businesses applying for a PPP loan can also apply for Employee Retention Tax Credits (ERTC), if the credits are not applicable to wages paid with forgiven PPP loan funds. In the CARES Act PPP loan, businesses participating in the Paycheck Protection Program did not qualify for the ERTC.

The Act also redefines payroll costs to specifically include group insurance payments made on group life, disability, vision and dental insurance.

PPP improvements relevant to restaurant businesses

  • Expands PPP allowable and forgivable expenses to include supplier costs on existing contracts and purchase orders. This includes costs for technology operations expenditures (e.g., payment for software and cloud services), perishable goods, and worker protective equipment.
  • Enhances flexibility by allowing borrowers to select their loan forgiveness covered period between 8 weeks and 24 weeks.
  • Simplifies the forgiveness application process for loans up to $150,000.
  • Enables PPP borrowers to include additional group insurance payments when calculating PPP payroll costs. This would cover insurance plans such as vision, dental, disability and life insurance.
  • Allows borrowers who returned all or part of their PPP loan to reapply for the maximum amount applicable.
  • Sets aside PPP funding for small businesses with fewer than 10 employees, those in low/moderate income areas, and funds for small community banks, credit unions and community-based lenders, in an attempt to make it easier for smaller, needier businesses to get PPP loans.

PPP loan eligibility

  • Gross receipts must have declined by 25% or more in any quarter of 2020 compared to 2019. (This exceeds the 20% advocated by the National Restaurant Association.) This loss must be measured by quarters, rather than a three-month period. Funds from PPP loans or other loans or grants are likely to be excluded from gross receipts.
  • Restaurant (or other small business) must have been in business prior to February 15, 2020.
  • Business mush have used, or will use, all previous PPP loan money.
  • Borrower must certify that the loan is necessary for the continued operation of the business.
  • Business must have fewer than 300 employees.
  • Qualified business can be a corporation, LLC, sole proprietor, self-employed or independent contractor.

How much PPP money can your restaurant business receive?

Good news for restaurants. While most businesses are able to get a PPP loan up to 250% (2.5 times) of their average 2019 monthly payroll, the new legislation allows accommodation and food service businesses (hotels and restaurants) to borrow up to 350% (3.5 times) of average 2019 monthly payroll costs. The maximum loan amount is $2 million for a second-draw PPP loan. For example, if your restaurant business had an average monthly payroll of $50,000, you can now apply for a $175,000 PPP loan. Payroll expenses include all costs for W-2 employees (wages, health insurance, bonuses, commissions, retirement, and state and local taxes). Costs for independent contractors cannot be included in your monthly payroll costs for purposes of calculating your maximum loan amount.

What is the difference between a First Draw Loan and a Second Draw Loan?

As defined by the SBA, First Draw PPP loans are for those borrowers who didn’t receive a PPP loan before August 8, 2020 during the first two PPP rounds open between March and August 2020.

Second Draw PPP loans are for eligible small businesses with 300 or fewer employees that previously received a PPP loan. These borrowers must have used the full amount of their first PPP loan only for authorized uses and demonstrate that they had a minimun of a 25% reduction in gross receipts between comparable quarters in 2019 and 2020. The maximum amount of a Second Draw PPP loan is $2 million.

The Paycheck Protection Program remains open for First and Second Draw PPP loans until March 31, 2021, as set forth in the Economic Aid Act, or until Congressionally appropriated funding is exhausted.

Ensuring your PPP loan can be forgiven

As with the earlier PPP program, you must use a minimum of 60% of PPP funds on payroll expenses (wages, salaries, retirement, group health insurance, etc.). However, qualifying non-payroll expenses have broadened beyond rent, mortgage interest and utilities, to include payment for software, cloud services, property damage due to civil unrest, accounting and human resources, personal protective equipment and COVID-19-prevention equipment and – supplier costs that were ordered (or contracted) before you got the loan or costs of perishable goods ordered before or during the life of the loan.

Aside from the 60% you spend on payroll to ensure forgiveness, the remaining 40% can be forgiven if you use it for other qualifying expenses during your choice of an eight- or 24-week period.  A borrower may elect a “covered period” ending at any time between eight weeks and 24 weeks after loan origination.

Simplified form for forgiveness of smaller loans

In the NRA’s plan for how a second PPP could be strengthened to reflect the unique needs of the restaurant industry, the association proposed a streamlined process for forgiveness of smaller loans, suggesting that for restaurants with PPP loans of $150,000 or less, a one-page attestation form can help a small business and its lender save much-needed time and money.

That provision was included in the new Paycheck Protection Program. If you receive a PPP loan for $150,000 or less, you can use the new simple, one-page form to apply for forgiveness. After you get the loan, ask your lender for a link to the one-page form. (It will also be linked within this blog post once it is available.)

The Act beyond the Paycheck Protection Program

In addition to the PPP loan, the Act includes an extension of the deadline to apply for the COVID-19 Economic Injury Disaster Loan (EIDL) to December 31, 2021. The EIDL is a low-interest loan providing working capital funds to help eligible businesses make it through this challenging time. Details on the new round of EIDL grants have not yet been made available by the SBA. Check back for updates.

Also, the Act extends the Employee Retention Tax Credit (ERTC) through June 30, 2021. For calendar quarters beginning with Q1 2021, the ERTC was expanded by increasing the percentage of the tax credit from 50% to 70% of

qualified wages paid to an employee up to $10,000 per calendar quarter and expanding eligibility by reducing the threshold for the decline in gross receipts from 50% to 20%. Additionally, the new bill allows an employer with an average number of no greater than 500 full-time employees may use the credit, even if the employee is working. As previously mentioned, the Act allows employers that obtained PPP loans to claim the ERTC on eligible wages not used to support PPP loan forgiveness.

Actions you should take now to secure a PPP loan

Many restaurant owners and operators learned during the last round of PPP funding that if they weren’t prepared on the first day that loans were available, the money could run out before they even applied.  Consequently, follow these steps to be prepared to apply once PPP funds are available.

  1. Determine your income by quarter in 2020 versus 2019.
  2. Gather all of your information before the application opening date. (While the application and instructions are not yet available for the PPP loan under the new stimulus bill, you can access instructions for the previous PPP loan to familiarize yourself with the information and documentation that may be requested.)
  3. Connect with an individual lending officer at your financial institution to increase your likelihood of getting a PPP loan. If you received a loan in the last PPP round, contact that lending officer. Most banks and financial institutions that participated as PPP  loan lenders under the CARES Act are expected to continue their PPP lender engagement. Refer to SBA participating lenders by state as of June 25, 2020 to locate a potential loan lender.
  4. If you don’t have a relationship with a lending officer, simplify the process by contacting Restaurant365’s lending partner, Lendio.
  5. Stay up to date on application openings and deadlines.
  6. Apply for a PPP loan on day one.

When can you apply for a PPP loan?

The SBA in consultation with the U.S. Treasury Dept. announced on January 8, 2021 that the Paycheck Protection Program will re-open the week of January 11, 2021 for new borrowers and certain existing PPP borrowers. To promote access to capital, initially only community financial institutions will be able to make First Draw PPP Loans on Monday, January 11, and Second Draw PPP Loans on Wednesday, January 13.  The PPP will open to all participating lenders shortly thereafter. This round of the PPP authorizes up to $284 billion toward job retention and certain other expenses through March 31, 2021 (subject to the availability of funds), and by allowing certain existing PPP borrowers to apply for a Second Draw PPP Loan.

Update: The SBA opened the Paycheck Protection Program (PPP) loan portal to PPP-eligible lenders with $1 billion or less in assets for First and Second Draw applications on Friday, January 15, 2021 at 9:00 am ET.  The portal will fully open on Tuesday, January 19, 2021 to all participating PPP lenders to submit First and Second Draw loan applications to SBA.

The SBA has provided an overview of First Draw PPP Loans and Second Draw PPP Loans, including full forgiveness terms, targeted eligibility, maximum loan amount and increased assistance for accommodations and food services businesses (hotels and restaurants).

If you wish to begin preparing your application, you can download the following PPP borrower application forms to see the information that will be requested from you when you apply with a lender:

Read the SBA’s latest PPP loan information (as of January 11, 2021). For additional information, visit


Under the new stimulus package, software and cloud services are qualified non-payroll expenses that can be forgiven costs of your PPP loan. If you’re looking for ways to operate your restaurant more efficiently with software that empowers your store-level managers to save on food and labor costs, consider an all-in-one restaurant management solution. Restaurant365 incorporates restaurant accounting softwarerestaurant operations softwareinventory management softwarepayroll + HR software, and scheduling software into an all-in-one, cloud-based platform that’s fully integrated with your POS system, as well as to your food and beverage vendors, and bank.

Ask for a free demo of Restaurant365 today.

DISCLAIMER: This blog post is based on information released as of January 11, 2021 and is intended for informational purposes only. Consult your CPA or tax advisor for specific questions related to your business.

Ready to learn how Restaurant365 can help you streamline your back office and discover profits?

Schedule a demo today.