The U.S. House of Representative-approved $908 billion COVID-19 relief bill, passed by the Senate on Dec. 21 after many weeks of deliberation, offers a second round of access to the Payment Protection Plan (PPP) as well as other new benefits for small businesses, including restaurants and foodservice businesses.
The package, part of Congress’ $1.4 trillion spending bill, in addition to including stimulus checks for Americans, unemployment assistance and funds for vaccine distribution and contact tracing, also expands PPP funding to $284 billion, which will provide businesses with a forgivable loan based on 2.5 times its monthly payroll costs.
The National Restaurant association pointed out that restaurants and foodservice businesses, hotels/lodging and bars can seek forgivable loans based on 3.5 times monthly payroll costs under NAICS code 72. They also don’t have to abide by the 300 or less combined total of employees rule, but rather, they can apply for PPP as long as they don’t employ more than 300 per location.
What else is new is that the benefit for small businesses is that the forgiveness application has been made simpler for borrowers of $150,000 or less. Businesses are allowed to take into count their average monthly payroll in 2019 or in the early months of 2020 before the pandemic as long as they demonstrate at least a 25% revenue loss for any calendar quarter in 2020 compared to the year prior. The new round of PPP can also cover cleaning products and some food costs and expenses for social distancing reconfiguration, in addition to just payroll expenses, and business meal deduction has been expanded to 100 percent.
According to the National Restaurant Association, businesses can deduct allowable business expenses paid with PPP loans, including payroll, rent, mortgage interest, utilities and other allowable expenses. Employee Retention Tax Credits (ERTC) will be available for the first two quarters of 2021 and will allow certain employers to take up to $7,000 per eligible employee. Employers who received a PPP loan may still quality for ERTC on wages not paid for with forgiven PPP funds.
The Work Opportunity Tax Credit (WOTC) will be extended by five years, which grants support for restaurants that hire, train and retain employees from target groups. The bill also features some temporary enhancements to Small Business Association (non-PPP) lending programs, including reduced or no fees for certain loans. For loans taken prior to the CARES Act, the National Restaurant Association pointed out that restaurants are allowed to take five months beyond the three offered for other businesses for principal and interest paid by the government.
“The action taken by Congress today will keep tens of thousands of restaurants from closing in the coming months,” said Tom Bené, president and CEO of the National Restaurant Association. “A second round of PPP, combined with unique enhancements for the restaurant sector, will provide critical access to capital. Restaurant operators and their employees are dedicated to serving their communities, and today’s bipartisan agreement will give them the opportunity to do that through the holidays. However, the long-term economic challenges facing independent, franchise, and chain restaurants will not end with the new year, and we will continue to press federal and state leaders for the support that will put us on the road to recovery.”
Sean Kennedy, executive vice president of public affairs for the Association added in a statement: “Restaurants have waited months for a comprehensive relief bill that reflects the magnitude of this crisis. Today’s bipartisan action is a ‘down payment’ that recognizes the unique damage the pandemic is inflicting on our industry. Congress heard from us and hundreds of thousands of our restaurant members about basic steps to improve PPP for our industry—and they listened. We appreciate Senate and House Leadership, key committee chairs and ranking members, and the group of moderates, each of whom played a critical role in this process. There is much more to be accomplished, and we will continue to press in 2021 at the federal, state, and local level on behalf of the industry, our employees, and our customers.”
In November, the National Restaurant Association conducted a survey of 6,000 restaurant operators and 250 supply chain businesses, which found that 87% of full-service restaurants (independent, chain, and franchise) report an average 36% drop in sales revenue, and 83% of such operators expect sales to be even worse over the next three months. Fifty-nine percent of operators also reported that their total labor costs (as a percentage of sales) are higher than they were pre-pandemic, and 58% of chain and independent full-service operators expect continued furloughs and layoffs for at least the next three months. As of December, 17% of restaurants—more than 110,000 establishments—are closed permanently or long-term.
In addition to support of the compromise proposal, the Association provided a plan for how a proposed second draw from the Paycheck Protection Program (PPP) could be strengthened to reflect the unique business model of the restaurant industry and highlighted other important measures in the proposal that would support restaurants in the short-term. Here is a link to the full letter and Association’s full Blueprint for Restaurant Revival that includes the long-term recovery needs of the industry is here.