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[Rick Braa] What to do with PPP loans once you receive them?

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Acclaimed restaurant consultant Rick Braa hosted a webinar on the Paycheck Protection Program (PPP) loans, providing guidance on how the loans work and how you can best spend the money. In parts six and seven Braa provided some guidance on how to spend these loans and how the Economic Injury Disaster Loan (EIDL) differs from the PPP. 

PPP loan money is limited to only select purposes: payroll (which must amount to 60%), rent, utilities and mortgage interest. You can’t use it however you want.  

If you received a PPP check prior to June, which many did, you should go to your bank and request your bank term your loan from two years to five years and from a six-month deferral to a one-year deferral. Banks have been accommodating, Braa said, as those who received loans early were disadvantaged to those who received them later. So go back to your bank and ask them for a five-year term. This can create a bit of breathing room, Braa said.  

He says he has had not very good luck with the national banks in this regard, but he would urge you to continue to ask and ask and ask and not assume they will say no.   

Regarding the EIDL, Braa detailed some of the scope of these loans, which have totalled to $190 billion to date. In Washington State loaned $3.8 billion. Its initial terms were up to $150,000 and included a $10,000 grant — the $10,000 is no longer available, however. There’s a 30-year-term, and no prepayment penalty. 

Braa spoke very favorably about this loan, saying that it comes out to about $750 a month over 29 years, a very flexible span of time to be paid off.  

This money is not to be spent on any of the same things as the PPP loan money. Use it for working capital, or other expenses. You can pay it off at any point, which is especially important for restaurants, who may not remain open for a 30-year-span. When you decide to sell your restaurant, you’ll want to pay this off fully.