PPP Loan Forgiveness: Strategies For Maximizing Loan Forgiveness For Restaurants

The restaurant industry has been severely impacted by the COVID-19 outbreak. From restrictions on indoor dining to complete shutdowns, restaurant owners have had to pivot and adapt in numerous ways to keep their businesses afloat. One lifeline has been the Paycheck Protection Program (PPP), a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. While this program has been a financial cushion for many, the end game for most business owners is to achieve loan forgiveness, turning that PPP loan into a grant.

However, the path to PPP loan forgiveness isn’t a straightforward one. It involves strict criteria, meticulous record-keeping, and a good understanding of the regulations. If you’re a restaurant owner looking to maximize PPP loan forgiveness, this blog post is for you. 

We cover ten strategic points to consider that can help you navigate this complex process.

Understand The Rules And Regulations

The first step to maximizing PPP loan forgiveness is to thoroughly understand the rules and regulations set forth by the Small Business Administration (SBA) and the Treasury Department. These rules dictate what you can and cannot do with the funds, and breaking them, intentionally or not, could jeopardize your eligibility for loan forgiveness. Make sure you’re updated with the most recent guidelines and amendments, as rules have been known to change.

One critical factor is the loan’s ‘covered period,’ which is the time frame during which you must use the funds for eligible expenses like payroll, mortgage interest, rent, and utilities. Typically, you can opt for an 8-week or 24-week covered period. During this period, at least 60% of the forgiven amount must be used for payroll costs.

In addition to this, it’s recommended to consult with financial advisors or trusted IRS tax settlement services attorneys who can guide you through the intricate maze of federal regulations. They can offer you specific advice tailored to your situation, ensuring that you remain compliant while maximizing forgiveness.

Keep Impeccable Records

Record-keeping is a non-negotiable aspect of the PPP loan forgiveness process. You’ll need to provide accurate documentation to prove how the loan amount was spent. For restaurants, this means keeping track of all expenditures, from staff wages and tips to utility bills and rent payments.

Consider setting up a separate bank account specifically for your PPP funds. This can make it easier to trace every transaction and will simplify the process when you’re applying for forgiveness. Maintain receipts, invoices, bank statements, and any other relevant documentation. Digital tracking systems and accounting software can help keep things organized.

Maintain Staff Levels

Employee retention is a significant factor in qualifying for PPP loan forgiveness. You need to maintain staff levels and pay rates as they were before the pandemic. However, for many restaurants, layoffs or pay cuts have been an unfortunate necessity. If you’ve had to reduce your workforce, aim to rehire staff or hire new ones to meet the requirements.

It’s essential to understand the full-time equivalent (FTE) calculations and how they might affect your eligibility. The loan forgiveness amount can be reduced if you decrease your FTE employee level.

Use Funds For Eligible Non-Payroll Expenses

While at least 60% of the loan must go towards payroll expenses, the remaining 40% can be used for other eligible non-payroll costs. This includes:

  • Rent or lease payments for property used for business
  • Mortgage interest payments on business property
  • Utility payments, including electricity, gas, water, and transportation

Carefully allocate funds to these eligible categories to make the most of the loan. Each expense needs to be properly documented, so keep all your bills, lease agreements, and other relevant paperwork.

Apply For Forgiveness Timely And Accurately

Don’t wait until the last minute to apply for loan forgiveness. The application process itself requires time and attention to detail. Different lenders might have different application forms and requirements, so it’s advisable to check with your lender as early as possible to understand what you’ll need to provide.

Triple-check your calculations, fill in the forms accurately, and attach all necessary supporting documents. Errors or missing information can lead to delays, or worse, reduced forgiveness.

Be Prepared For Audits

It’s not uncommon for PPP loans to be audited, especially for larger loan amounts. The SBA reserves the right to review any loan application and loan forgiveness application. During an audit, you’ll need to provide all supporting documentation, including how you calculated the loan amount and how the funds were used.

Therefore, make sure your records are complete and accessible. In the case of an audit, being well-prepared can save you a lot of stress and potential legal issues.

Reallocate Funds Wisely

There may be instances where you realize that the initial allocation of your PPP loan towards certain eligible expenses was an overestimate. In such situations, it’s important to know that you have the flexibility to reallocate these extra funds to other qualified expenses. However, while doing this, always keep in mind that a minimum of 60% of the loan amount must be devoted to payroll costs to qualify for full loan forgiveness.

For example, if you initially set aside a substantial amount for utility payments but later find out that these costs were lower than expected, you could reallocate the remaining balance to cover additional payroll expenses or perhaps lease payments. However, reallocating funds should not be done haphazardly. 

Before making any shifts in how the loan amount is used, consult a financial advisor to ensure you’re making a move that is both beneficial and compliant with PPP rules and regulations.

Monitor Local And State Grants

Some local and state grants can influence the amount of your PPP loan forgiveness. For example, if you receive a state grant to cover utility costs, that amount should not be claimed under the PPP loan for forgiveness for utilities. 

Being unaware of these intricacies can lead to accidental double-dipping, which is against federal regulations and could result in reduced forgiveness or even legal consequences.

Consider The Tax Implications

Initially, there was some confusion around the tax implications of PPP loans. However, it was later clarified that expenses covered by a forgiven PPP loan are tax-deductible. This offers an additional financial cushion for restaurant owners. 

Nevertheless, tax codes can be complicated, and it’s crucial to consult a tax professional to understand how these rules apply to your specific circumstances.

Leverage Supplier Relationships

While it may seem unrelated, nurturing your supplier relationships can indirectly benefit your PPP loan forgiveness strategy. 

For instance, negotiating extended payment terms with suppliers can free up short-term cash flow, allowing you to allocate more of your PPP loan towards eligible costs like payroll, thereby maximizing forgiveness. 

However, ensure that such negotiations are formally documented, as sudden changes in your financial conduct might raise red flags during a potential audit.

Also Read: How Shopify Services Can Elevate Your Business to New Heights


Maximizing PPP loan forgiveness is a multi-step process that requires keen attention to detail, rigorous documentation, and a thorough understanding of the loan’s terms and conditions. The stakes are high, but by following these ten strategic points, restaurant owners can navigate through the complexities of the PPP loan program more confidently. 

Professional guidance from financial advisors can further help in aligning your efforts with the legal requirements. In these challenging times, utilizing every financial tool at your disposal can make the difference in not just surviving, but thriving as a restaurant business.


Who has authority to forgive PPP loans? 

The U.S. Small Business Administration (SBA) has authority to forgive PPP loan

What happens if you don’t pay back a PPP loan?

If you don’t pay back a PPP loan, it may convert into a loan with interest, and the borrower could face collection efforts.

What is the deadline for PPP loan forgiveness?

The deadline to apply for PPP loan forgiveness is 10 months after the end of the borrower’s chosen covered period.

Ashley Lipman

Content marketing specialist

Ashley Lipman is an award-winning writer who discovered her passion for providing knowledge to readers worldwide on topics closest to her heart – all things digital. Since her first high school award in Creative Writing, she continues to deliver awesome content through various niches touching the digital sphere.

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