Navigate PPP: 3 Steps To Getting New Federal Relief Coping with COVID-19
Over the past year, the struggle for corporate survival has been particularly difficult. This was especially true for very small businesses, and most restaurant and food service businesses fall into this category. With an average American restaurant with fewer than 50 employees, it’s no surprise that food services have been among the hardest hit by COVID-19.
Thankfully, with the signing of the latest stimulus bill, further federal relief for small businesses is on its way – but restaurateurs are likely to receive news of this funding with skepticism, and I don’t blame them.
While working at Nav, a fintech company that helps SMBs get financing, I saw how the first round of aid has failed for smaller businesses, restaurants included. In 2020, our team helped over 4,000 business owners get loans through the Paycheck Protection Program, but we also know that many have been left behind, often due to the resources to navigate. the process. Pardon applications alone take up to 15 hours to complete and more than three days to review by lenders, according to a Government Accountability Office study. Many restaurateurs just don’t have this time.
Another reason the first round of P3s failed at too many restaurants was the focus on payroll. In the first wave of P3s, you had to spend 75% on payroll expenses, then reduced to 60%. For many restaurateurs, this did not adequately meet their most pressing needs, such as rent or mortgage payments. In addition, those drastically downsizing had to choose between paying employees who couldn’t come to work or letting them collect unemployment, the latter often translating into more money for the employee.
After digging into the new bill, although similar to the first round, the second drawdown of PPP loans will bring about subtle changes that should benefit restaurants. For example, the way you can use the funds is more flexible and there are favorable tax changes. That said, the process can still be overwhelming, especially for businesses with already limited resources. With the lessons of the first wave of P3s in mind, here are three steps restaurant owners can take to streamline their quest for further federal relief.
1. Start by determining what you are eligible for.
If your business has already secured a PPP loan but needs more funds to survive the crisis, there is good news. You may be eligible for a second PPP loan. To be eligible, businesses must qualify as a small business by SBA standards, but they must also employ fewer than 300 employees and have experienced a reduction of at least 25% in their gross revenues in at least one year. quarter of 2020 compared to 2019, with terms for seasonal businesses or businesses that were not in operation throughout 2019.
Didn’t get a PPP loan the first time? You may also be lucky. Congress allocated funds for the first loans on the same terms as the original PPP loans; second drawdown of loans for those who have already obtained a first PPP loan and who are still eligible, and; “gap” loans for businesses that have repaid their first loan or have not received the full amount for which they were eligible. If you’re unsure of where to start, there are free resources available to help business owners determine how much financing and rebate they’re entitled to, like Nav’s P3 loan calculator.
In addition to the PPP, restaurants may be eligible for an economic disaster loan, including a grant of up to $ 10,000. Companies that have already applied for the EIDL can this time qualify for the $ 10,000 grant, even if their previous application was rejected. Businesses apply for EIDL on SBA.gov.
2. Approach the application process strategically – you have options!
The most important thing you can do to prepare for this round is to make sure your accounts are up to date. Your accounting information will be needed to determine if you qualify. During the last cycles of PPP and EIDL, many companies found it difficult to apply because their information was out of date.
Also, it’s a good idea to have a business bank account so you can track how you’ve spent those funds. Both programs limit the use of funds to certain types of expenses.
Then don’t feel like you have to work with your bank. You can apply with any SBA approved lender. As we saw with the first round, the way the PPP is set up means that banks often prioritize those with whom they already have loans, then larger accounts, before giving preference to smaller companies (many restaurants included). Indeed, most traditional banks have no incentive to serve smaller businesses. Consider your options beyond traditional channels; in the last cycle, for example, we found that many small businesses were well served by fintech companies. A strategic approach to selecting a lender could be the difference between getting much-needed help or continuing without it.
3. If you are not eligible for PPP or EIDL, don’t panic.
If you are eligible for PPP and EIDL, you must apply. You can even apply for both programs, and if you qualify for both, I recommend it. PPP can be completely forgiven and EIDL can offer a grant that does not have to be repaid, as well as a 30-year loan at 3.75%. But these COVID-19 relief programs are not available to everyone. They are not designed for startups, for example; you must be in business by February 15, 2020 to apply to PPP and by January 31, 2020 to apply to EIDL. If you started around the pandemic and have yet to gain popularity, you will need to consider other funding options.
Crowdfunding, for example, has been a source of relief for some small businesses during the pandemic. There are four main types of crowdfunding restaurants that restaurants can consider: reward-based, debt-based, equity-based, and donation-based. Whether you’re rewarding your backers, taking out a loan, getting investors, or accepting donations, for all of these options, the key to successful crowdfunding is connecting with a loyal fan base. To that end, building a strong email list and investing time in social media content can go a long way.
Also be aware that there are still new grants and loans to help COVID-19 at the national and local levels. Homeowners should subscribe to the mailing list of their local chamber of commerce, regional SBA office, as well as their local Small Business Development Center and SCORE chapter so that they can learn about new opportunities when they arise.
With that, I wish you good luck and hope I can have a safe dinner with you again soon.