How Restaurants Are Claiming Forgivable Loans Through SBA’s Paycheck Protection Program


Has your restaurant or small business applied for the government’s new “forgivable loan” (a loan that may convert to cash that you do not have to repay)? It’s called the Paycheck Protection Program (PPP), and banks are accepting applications this week. This direct cash incentive is part of the $2 trillion CARES Act stimulus package recently signed into law on March 27th, 2020. According to the U.S. Small Business Administration (SBA), this is the first week to apply.

You may want to immediately consider filing out the application form to submit as soon as possible. A quick disclaimer: The information in this article is current as of publication and is subject to change, as updates are arriving almost by the hour. All information here is not financial or legal advice.

You should first consider applying directly with your existing bank or lender. Unlike the Economic Injury Disaster Loan (EIDL) which was launched for coronavirus relief in early March, applicants for PPP may not apply directly to the SBA.

Friday, April 3, 2020 was the opening day for PPP applications. However, the only major bank accepting applications as of April 3rd was Bank of America. (President Trump thanked Bank of America for being first.)

More banks are accepting applications by the hour. Check this list of the most active SBA lenders in the U.S. by lending volume as of last year. Many of these institutions will continue their SBA participation rates this year by offering PPP loans.

Here are some highlights and bank updates of the morning of Monday, April 6, 2020:

  • Silicon Valley Bank (SVB) announced that it expects to open applications Monday afternoon.
  • First Republic is currently accepting applications for existing customers via email only.
  • Mercury plans on accepting applications for their customers and submitting them to the SBA this week.
  • Chase has started collecting callback information from interested clients and is working on launching a full application.
  • Bank of America has relaxed some of its requirements so that you can apply even if you do not have a lending relationship already (but you do still need to be an existing bank customer).
  • Radius Bank has indicated that they might accept PPP applications for non-customers while capacity lasts; non-customers must call to request pre-approval.

Many lenders are only servicing their existing customers, especially those business owners who had active business checking accounts as of Feb 15th, 2020. If possible, start the PPP application process directly with your own bank or lending institution.

Obviously, application numbers are exploding across the country. Here are some statistics just from Friday, April 3rd:

  • The SBA has processed over $1.8 billion in PPP loans alone.
  • Bank of America received 145,000 applications on Friday totaling over $30 billion in loan requests.

Application Tips

To begin applying, prepare the following documents and ensure they are signed and ready for submission:

  • Completed official SBA Loan Application
  • Payroll information
  • Final 2019 financial statements or tax returns
  • IRS form 941s for each quarter of 2019
  • IRS form 940 for year-end (December 31, 2019)
  • Articles of Incorporation, Articles of Organization, Partnership Agreement, or Trust Agreement
  • Corporate Bylaws/LLC Operating Agreement
  • Passport or driver’s license for anyone owning more than 20% of the company

One quick note regarding Form 2483: Make sure to use the most updated version of this paper, as the SBA just updated this on mid-morning, April 3rd. This new form may reduce processing time by the SBA.

When applying, remember to only base calculations on IRS Form W-2 wages. Do not include payments you made on IRS Form 1099-MISC to independent contractor recipients. Under today’s SBA guidelines (which again, are changing almost daily), independent contractors must apply for PPP on their end, under their own application, to prevent “double dipping” per the SBA.

Therefore, if you did not declare wage payrolls in the fourth quarter of 2019, you may not be eligible for the program. All processing is subject ultimately to federal SBA and bank processing criteria.

Here is the current link to SBA’s PPP application forms (Please check as they keep updating the version almost daily.) More Information and facts about the program can be found directly on the on the SBA Covid-19 Disaster Relief Website here.

Here at Restaurant Engine, we are here to help you as needed. We will continue covering this important program for our customers. Many readers expect to receive many thousands of dollars in forgivable loans, amounting to essentially a disaster relief grant that will help them survive the current economic depression.

Note that there are time lags from when something is announced on television or Twitter, versus when those changes are actually effectuated on government and bank websites.  Any benefits – subject to meeting any SBA program criteria – will also be expected to take time before being processed. Please remember to set your expectations for this program accordingly for your restaurant’s operational plans. Nothing in this article should be relied upon for financial, tax, or legal decision-making. Contact your licensed financial advisor, accountant, and lawyer for final advice on issues relevant to your unique business and personal situations.

Photo by Alexander Mils on Unsplash

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