How restaurant owners can cash in on PPP loans and get up to 3.5 times their monthly payroll

  • The $900 billion stimulus deal includes $325 billion for small businesses and a continuation of the Paycheck Protection Program. 
  • To be eligible for PPP loans, businesses must have 300 or fewer employees and demonstrate at least a 25% loss in revenue.
  • Borrowers in the accommodation or food services sector can receive up to 3.5 times their monthly payroll, with loans capped at $2 million.  
  • Visit Business Insider's homepage for more stories.

As part of the new $900 billion stimulus bill, more than a third — or $325 billion — is earmarked for small businesses and a continuation of the Paycheck Protection Program. 

With these additional funds, businesses in the food services or accommodation industries, such as bars and restaurants, will have access to larger loans, up to 3.5 times their average monthly payroll costs, instead of the typical 2.5 times, the bill states. 

"There is an inordinate amount of focus on the service sector that got devastated and won't be back until there's a vaccine," Henrietta Treyz, the director of economic policy at investment research firm Veda Partners previously told Insider.

However, it's important to remember that eligibility requirements for other businesses also apply to the beleaguered service sector. For instance, a company must have 300 or fewer employees and demonstrate at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same time period in 2019.

There are alternative calculations for seasonal businesses and businesses started after 2019.

In addition, PPP loans will be capped at $2 million. Borrowers must spend at least 60% of the funds on payroll to be eligible for full forgiveness, while the remaining 40% may be used on permitted expenses like rent, utility payments, personal protective equipment, and property damage that may have occurred during public unrest in 2020.

Business owners will not be taxed on PPP funds received, and they may deduct eligible expenses paid for with these funds.

Once the SBA issues official guidance on the renewal of the PPP, which the bill states it has 10 days from enactment to do so, business owners will be able to apply for loans through approved SBA lenders and community banks.

Until it releases updated guidance, the SBA provides several resources on its website from the last round of PPP loans, which closed in August. These documents may give you an idea of where you can apply and what information you will need to provide on the application, until the latest guidelines are available.

Business financing company Nav created a PPP portal for business owners to get a head start on their applications.

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