Paycheck Protection Program Update To Favor Restaurants

Paycheck Protection Program Update To Favor Restaurants

Many restaurant owners have been worried that the more-than-favorable wages that their laid-off employees are receiving under the updated unemployment guidelines will be more enticing to retain for as long as possible instead of returning to work for a lower wage at their restaurant. This in-turn is raising two big questions with many restaurateurs. Will my employees come back now that I have the funds to pay them? And, if they don’t come back and I can’t rehire fast enough, will this impact my PPP loan forgiveness amount? The latest news is the paycheck protection program update to favor restaurants.

On May 3, 2020 the Small Business Association (SBA) along with the Department of Treasury updated their FAQs to address this issue and will be implementing a new clause in the PPP guidelines:

Will a borrower’s PPP loan forgiveness amount (pursuant to section 1106 of the CARES Act and SBA’s implementing rules and guidance) be reduced if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?

Then short answer to this question is, no, it will not be reduced. To qualify for this exception, the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation. This may give restaurant owners the leverage they need to be able to rehire their staff when the time comes.

If your restaurant received or is waiting to receive a PPP loan, it is imperative that you understand all the guidelines set by the SBA to ensure you don’t have to repay this loan. While this new clause will help the restaurants in one aspect of ramping back up during the phased openings, there are still other conditions that must be met to be fully forgiven. Check with your SBA lender to ensure you’re following all the rules set for the PPP loan.

If your PPP loan won’t be enough to give your restaurant the capital boost it needs to reopen, we’re here for you. Our local loan consultants are available to discuss your situation and provide you with the best loan options to meet your needs during this time.