FAQ's
Is the PPP right for my business?
The PPP, on it's surface, sounds like a great idea. The government will lend you funds and if you spend it a certain way, that loan will be forgiven. However, many operators have realized that this loan program may not provide the relief needed for the restaurant industry.
Why might the PPP not work for me?
Something to consider....the clock on the 8 weeks starts ticking as soon as the money hits your account. For some operators, it might not make sense to take employees off UI because they will not be in operation. Our industry will most likely need a ramp up period back to capacity. It might make more sense for operators to use that money in 5-8 weeks, which is currently not permitted.
Reminder, the PPP was written to take into account all businesses. As we know, our industry is different due to it's size, labor intensity and disproportionate COVID-19 impact.
What about the EIDL Loan?
There are two SBA emergency capital programs that are available to the public in addition to the PPP.
What is the major difference between the PPP and EIDL?
The EIDL loan is a standard loan and may be spent in a variety of ways. The downside is the loan is not forgiven. The PPP has restrictions on how the money can be spent, but does offers the potential for forgiveness. In order to be forgiven, the PPP applicant must meet all the criteria set forth for forgiveness.
Which is better for my operation?
The MRA can’t advise what specific course of action to take (whether it’s PPP, EIDL, Employee Retention Tax Credits or some combination of each.T he best advice we can offer is to work with your trusted banking and accounting professionals to come to a solution that works for you.
Consideration needs to to be given to:
Will my unemployment insurance rate skyrocket?
On today's Government Administration call, Secretary of Labor Acosta reiterated that she was well aware of the experience rating issue. As rates are not set until next January, the Administration is committed to addressing this issue on the other side of the crisis.
Is the $600 Federal Unemployment money taxable?
Yes, for those eligible for FPUC, the $600 payment is considered taxable income. States must include the FPUC payments when preparing Form 1099-Gs and must withhold taxes from an individual’s weekly benefit amount and the $600 payment when an individual elects to have taxes withheld.
With the additional $600 for employees on UI, there is no incentive for my employees to come back to work, even if I have hours to offer?
Eventually the state will catch up to the employee. The employee is supposed to certify that they are not being offered work opportunities. Under the current situation, initially the state will be hesitant to remove employees from UI, but ultimately, the employer will get the opportunity to inform the state that the employee has rejected employment hours.
I have not heard anything about my EIDL loan application?
According the Massachusetts SBA, EIDL loan approvals for MA small businesses continue to be processed on a daily basis. There is a significant volume of applications received and SBA processes on a first come first served basis. We were advised that EIDL loan advances (up to $10,000 calculated at $1000 per employee up to $10,000 max) started to go out this past Friday and is continuing.
What about employee retention tax credits?
The employee retention tax credit (ERTC) for employers subject to closure due to coronavirus. The provision provides a refundable payroll tax credit for 50% of wages paid by employers to employees during the crisis. The credit is available to employers whose operations were fully or partially suspended, due to a coronavirus-related shut-down order, or gross receipts declined by more than 50% when compared to the same quarter in the prior year.
For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the coronavirus-related circumstances described above. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.
ERTC credits cannot be combined with the PPP.
Just how important is the restaurant industry?
The United States restaurant industry totaled $854 billion in sales in 2019
This number is 35% higher than that of hotels, airlines, public transportation, professional sports, cruise lines, taxis and ride sharing services, and cinemas, COMBINED!!
What does loan forgiveness look like?
From the current Treasury guidance:
How much of my loan will be forgiven?
You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.
You will also owe money if you do not maintain your staff and payroll.
How can I request loan forgiveness?
You can submit a request to the lender that is servicing the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must make a decision on the forgiveness within 60 days.
The PPP, on it's surface, sounds like a great idea. The government will lend you funds and if you spend it a certain way, that loan will be forgiven. However, many operators have realized that this loan program may not provide the relief needed for the restaurant industry.
Why might the PPP not work for me?
Something to consider....the clock on the 8 weeks starts ticking as soon as the money hits your account. For some operators, it might not make sense to take employees off UI because they will not be in operation. Our industry will most likely need a ramp up period back to capacity. It might make more sense for operators to use that money in 5-8 weeks, which is currently not permitted.
Reminder, the PPP was written to take into account all businesses. As we know, our industry is different due to it's size, labor intensity and disproportionate COVID-19 impact.
What about the EIDL Loan?
There are two SBA emergency capital programs that are available to the public in addition to the PPP.
- First is a Low interest, long term “Economic Injury Disaster Loan” for up to 2 million. The first payment is deferred for 12 months. The application can be completed online at www.sba.gov/DISASTER
- Second, if you apply for that Disaster Loan – you can ask for an “Economic Injury Disaster Loan Advance” for up to $10,000 as part of the loan application. If approved, these funds can be used for payroll and other operating expenses and can be FORGIVEN.
What is the major difference between the PPP and EIDL?
The EIDL loan is a standard loan and may be spent in a variety of ways. The downside is the loan is not forgiven. The PPP has restrictions on how the money can be spent, but does offers the potential for forgiveness. In order to be forgiven, the PPP applicant must meet all the criteria set forth for forgiveness.
Which is better for my operation?
The MRA can’t advise what specific course of action to take (whether it’s PPP, EIDL, Employee Retention Tax Credits or some combination of each.T he best advice we can offer is to work with your trusted banking and accounting professionals to come to a solution that works for you.
Consideration needs to to be given to:
- how much of your business is currently generating revenue (totally closed vs. partial operating);
- how this may evolve in June/July/August/into the Fall;
- which employees are invaluable and what will the restaurant see with expected/usual turnover.
Will my unemployment insurance rate skyrocket?
On today's Government Administration call, Secretary of Labor Acosta reiterated that she was well aware of the experience rating issue. As rates are not set until next January, the Administration is committed to addressing this issue on the other side of the crisis.
Is the $600 Federal Unemployment money taxable?
Yes, for those eligible for FPUC, the $600 payment is considered taxable income. States must include the FPUC payments when preparing Form 1099-Gs and must withhold taxes from an individual’s weekly benefit amount and the $600 payment when an individual elects to have taxes withheld.
With the additional $600 for employees on UI, there is no incentive for my employees to come back to work, even if I have hours to offer?
Eventually the state will catch up to the employee. The employee is supposed to certify that they are not being offered work opportunities. Under the current situation, initially the state will be hesitant to remove employees from UI, but ultimately, the employer will get the opportunity to inform the state that the employee has rejected employment hours.
I have not heard anything about my EIDL loan application?
According the Massachusetts SBA, EIDL loan approvals for MA small businesses continue to be processed on a daily basis. There is a significant volume of applications received and SBA processes on a first come first served basis. We were advised that EIDL loan advances (up to $10,000 calculated at $1000 per employee up to $10,000 max) started to go out this past Friday and is continuing.
What about employee retention tax credits?
The employee retention tax credit (ERTC) for employers subject to closure due to coronavirus. The provision provides a refundable payroll tax credit for 50% of wages paid by employers to employees during the crisis. The credit is available to employers whose operations were fully or partially suspended, due to a coronavirus-related shut-down order, or gross receipts declined by more than 50% when compared to the same quarter in the prior year.
For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the coronavirus-related circumstances described above. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.
ERTC credits cannot be combined with the PPP.
Just how important is the restaurant industry?
The United States restaurant industry totaled $854 billion in sales in 2019
This number is 35% higher than that of hotels, airlines, public transportation, professional sports, cruise lines, taxis and ride sharing services, and cinemas, COMBINED!!
What does loan forgiveness look like?
From the current Treasury guidance:
How much of my loan will be forgiven?
You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.
You will also owe money if you do not maintain your staff and payroll.
- Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
- Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
- Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
How can I request loan forgiveness?
You can submit a request to the lender that is servicing the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must make a decision on the forgiveness within 60 days.
