The US Congress has recently passed the CARES Act (Coronavirus Aid, Relief, and Economic Security) which is designed to alleviate some of the economic and medical impact put on American people and businesses during the COVID-19 health crisis.
The main benefit of the CARES act is to provide:
- Financial relief for small businesses
- Corporate tax provisions, and
- Expanded unemployment and benefits coverage to employees
In this article, we’ll dive into the specifics of the CARES Act and how it impacts (and benefits) restaurateurs and their teams.
The Paycheck Protection Program (PPPs)
The Paycheck Protection Program provides small businesses (like your restaurant) with 100% federally guaranteed “Paycheck Protection Loans” (PPLs).
What does my restaurant get?
The amount your restaurant is able to borrow through a PPL is based off of your monthly payroll costs—but the amount cannot exceed $10M. In general, this will be the average monthly payroll costs incurred during the last 365 days multiplied by 2.5, plus the outstanding balance of any EIDL.
The funds received can be used for payroll costs (as defined above), payments of interest on any mortgage obligation, rent, utilities, and interest on any other debt obligations that were incurred before February 15, 2020.
Who qualifies?
- Businesses that employ fewer than 500 employees and have been operational since Feb 15th, 2020
- Franchisee restaurants that are listed on the SBA Franchise Directory.
Note: Restaurants that employ more than 500 people and operate under a North American Industry Classification System code beginning with 72 may also qualify.
How do I apply?
You can apply for the Paycheck Protection Program through any SBA-approved lender. Check the SBA’s Lender Match tool to find a lender for your restaurant.
You can use the SevenRooms loan forgiveness calculator to calculate the details of your PPP.
Economic Injury Disaster Loans (EIDLs)
The Economic Injury Disaster Loan is not a new initiative, but the requirements have been changed due to COVID-19 to allow restaurants to obtain this credit regardless of if they’re receiving credit elsewhere. Now, restaurants who are facing substantial economic impact from COVID-29 are able to apply for an EIDL.
Additionally, the CARES act makes it possible for restaurants that apply for an EIDL (between Jan 31st and Dec 31st) to request a grant of up to $10K—which does not need to be repaid.
What does my restaurant get?
A grant of up to $10K to pay for paid sick leave for staff, payroll for retaining employees, meeting increased costs, paying rent, or repaying other obligations.
Your restaurant can receive a loan of up to $2 million with interest rates that do not exceed 4% per year.
Who qualifies?
- Businesses that are located within a state declared a disaster area by the SBA (currently all states are declared disaster areas by COVID-19)
- Businesses who have (or are like to) suffered substantial economic injury due to the disaster
- Businesses who have good credit and an ability to repay the loan
- Businesses with fewer than 500 employees
- Businesses who have not applied for the Paycheck Protection Program
How do I apply?
You can apply for an EIDL here.
The site is receiving a lot of traffic, so you may have to wait and recheck at a slower time.
Employee Retention Credit
As an effort to keep both staff and businesses functional, the CARES Act also includes the Employee Retention Credit, which provides funds to businesses to keep their staff on payroll during COVID-19.
What does my restaurant get?
With the Employee Retention Credit, your restaurant can take a reimbursed tax credit of up to 50% of the first $10K in wages every quarter for each employee.
Wages covered include salary, hourly wage, and tips—any compensation that an employer generally pays their employee for the work performed at their business. This can also cover the value of health plan benefits.
Who qualifies?
- Any business who is not a state or local government entity
- Must be an employer in businesses during 2020 and have had partial or full suspension of business activity
- Or have experienced less than a 50% reduction in gross receipts when comparing Q1 of 2020 to Q1 of 2019
How do I apply?
You must self-report tax credits on Line 13 of Form 941. Fill out Form 7200 to apply for any additional credits that are in excess of your tax bill. Learn more on the IRS website.
Social security payroll tax payments deferral
Restaurant owners can defer the payment of their share of the SOcial Security Payroll taxes until the end of 2022. The first half can be deferred to December 31st, 2021, and other other half until December 31st of the following year.
CARES Unemployment Programs
The Pandemic Unemployment Assistance Program (PUA)
The Pandemic Unemployment Assistance Program (PUA) is a benefit program providing unemployment benefits to your restaurant staff who do not qualify for other unemployment benefits.
What do my restaurant staff get?
Individuals can receive up to 39 weeks of benefits for weeks of unemployment, partial employment, or inability to work due to COVID-19.
Who qualifies?
- Staff who have become unemployed or are unable to work due to COVID-19
- Staff who are ineligible for other unemployment benefits
How do people apply?
Visit this website for more information.
Federal Pandemic Unemployment Compensation
Individuals who are receiving unemployment insurance benefits can obtain additional funds for up to four months.
This emergency increase of benefits will provide $600 per week for up to four months for your staff.
The Pandemic Emergency Compensation Program
The timeline for unemployment benefits can be expanded from 26 to 39 weeks to affected individuals. Only your staff who cannot obtain other forms of unemployment compensation, and those who are actively seeking employment, are eligible.
If your staff are also seeking the Federal Pandemic Unemployment COmpensation (above), they can still apply.
Recommended Reading: COVID-19 Restaurant Relief Programs
Other resources for COVID-19
If your restaurant and staff are suffering due to COVID-19, there are many programs and resources in place to provide assistance. Check out our COVID-19 resources page to find tools, articles, and other resources to help you stay afloat during this health crisis.
Follow us on Instagram for more daily updates on the COVID-19 situation and how your restaurant can navigate the current landscape.
Stay safe.
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Dew Smith
Hey! I'm Dew, the former Brand Strategist. I cultivated 7shifts' social and content garden, and I looked for ways to grow our network of restaurateurs, local talent, and tech companies.