In this 7-minute read:
- Are food truck and snack cart owners eligible for PPP loans?
- How much can food truck owners get for the PPP stimulus?
- What to spend your PPP loans on to receive loan forgiveness
- How can food truck owners apply for PPP loan forgiveness?
Great news! The Paycheck Protection Program has been extended through May 31, 2021—so if you haven’t applied yet, you can do so until then. Your application has to be submitted TO THE SBA before June 1, 2021, not just to your lender, so it’s important to get going ASAP. Start your application here!
This program was put in place to help small businesses like yours during a trying time. Whether you had to shut your food truck down sometime during the pandemic or have been busier than ever, you may be eligible for this forgivable COVID-19 relief loan.
Gig workers, freelancers, consultants, independent contractors, self-employed individuals and more are eligible for PPP loans. Check your eligibility with Womply in as little as 5 minutes, and you could receive up to $50,000 in forgivable PPP loans!
Are food trucks and carts eligible for PPP loans?
Independent food truck and snack cart owners are absolutely eligible to apply for and receive the PPP loan (and can actually qualify for 40% more on their second draw PPP loans). If you run a food truck, snack cart, roadside taco stand, pie shack, etc., your situation depends on your employment status. If you own the business, are an independent contractor, or are a franchisee, you likely qualify for PPP loans. If, on the other hand, you receive a W2 as an employee of a company who owns the food cart, you aren’t eligible to apply unless you also have “1099” or contract income from a side job.
There are a few other eligibility requirements that you need to make sure you meet, but as far as who this program was intended for, independent food carts, trucks, and vendors check the right box. Whether you operate independently without employees or you hire employees to help you out, this program is for you.
Depending on if this is your first or second time getting a PPP loan, you’ll have to meet a couple of other requirements if you wish to apply.
First draw loan requirements:
- Beyond having a business, acting as an independent contractor, or being self-employed, you must also have been in business as of February 15, 2020
Second draw loan requirements:
- You must have received the PPP loan once already
- You must have spent your first draw PPP funds on authorized expenses before you receive the disbursement for your second draw loan
- You must be able to show a 25% revenue reduction when comparing any quarter in 2020 to 2019
- You must have fewer than 300 employees
These are not exhaustive lists of eligibility requirements, but those are the basics that most businesses meet before applying. For more information, visit our PPP FAQ.
How much can food truck, carts, and vendors get for PPP loans?
The funds for the Paycheck Protection Program are limited, so there is a calculation in place to help lenders and the SBA determine how much a business is allowed to borrow. Fortunately for food truck owners, a new rule was implemented in 2021 that allows food and accommodation businesses (under NAICS category 72) to apply for an even larger amount if you are applying for a second draw loan.
Follow the steps in the calculations below to determine your max PPP loan amount.
First draw max PPP loan calculation for food truck owners without employees:
Step 1: Gather your 2019 or 2020 IRS Form 1040 Schedule C and get line 7 for your gross income (you can choose which year you want to use). If that amount is higher than $100,000, lower it to $100,000.
Step 2: Divide the number from Step 1 by 12 to get your average monthly income.
Step 3: Multiply your monthly average income by 2.5 to get your maximum loan amount.
Step 4 (if applicable): If you have the Economic Injury Disaster Loan in 2020, you may elect to add any outstanding amount of the loan made between January 31, 2020 and April 3, 2020 to your max loan amount. Do not add any advances you received for the EIDL as that doesn’t have to be paid back.
First draw max PPP loan calculation for food truck owners with employees:
Step 1: Aggregate your payroll costs (including the income that you pay to yourself). This process may vary depending on how your business is set up, but your lender can help you identify the numbers you need here.
Step 2: Divide the total from Step 1 by 12 to get your monthly average payroll costs.
Step 3: Multiply your monthly average payroll by 2.5 to get your maximum loan amount.
Step 4 (if applicable): Add any outstanding amount of the EIDL made between January 31, 2020 and April 3, 2020 to your max loan amount from Step 3. Just be sure not to add any advances you may have received since those don’t have to be paid back.
Second draw max loan calculation for food truck owners:
The second draw loan is where food truck owners can acquire a larger loan amount than other businesses.
The calculation for the second draw loan is similar to the first draw loan (work with the correct calculation if you have employees versus don’t have any employees), except that you can multiply your monthly average profit by 3.5 instead of 2.5 if your business falls under NAICS code 72. And you won’t add any EIDL amount if that was included in your first PPP loan.
Start your PPP application now (you have until May 31, 2021).
Food trucks, snack carts, hot dog stands, etc.: What to spend your PPP loans on to receive loan forgiveness
A huge appeal of the PPP loan for business owners is that they can be completely forgiven. But, in order to receive that forgiveness, you’ll need to spend your funds on approved expenses. In fact, even as you fill out the application, you’ll need to check how you want to spend these funds, so it’s helpful to understand what you can spend the loan on beforehand.
The first big rule of how to spend your funds is that at least 60% of your loan has to go toward payroll costs. If you are self-employed and don’t have any employees, then that “payroll” can go towards your own income. You could even use 100% of it for your income.
But, if you have employees, you’ll need to use that 60% to help keep them on staff and maintain their compensation levels (this includes your own pay as well).
The other 40% of your loan can be spent on the following eligible business costs.
Mortgage, rent, utilities
Do you pay rent on the space that you park or run a water line or electricity that you pay city utilities for? Or maybe you have a dedicated office space that you use to help manage your business. You can use your PPP loan to help cover those costs.
Interest payments on debts
If you have any debts related to your food truck business (business loans, credit cards, equipment loans, etc.), your PPP loan can help cover the interest payments on those debts.
Certain expenses that help facilitate business operations can also be covered. This includes any business software or cloud-computing service that helps with product or service delivery, payment processing, inventory management, invoicing, processing payroll, or other sales and billing functions. You likely have a payment processor that you subscribe to and maybe even an online ordering platform that customers can use as well. Those are examples of the types of operational expenses that the PPP loan can help with.
Do you have suppliers for your food products or dishware? Supplier costs can be covered so long as the purchase order or contract was in place before the first day of your covered loan period.
In several places across the United States, mask mandates and other public health guidelines are in place to help limit the spread of COVID-19. If your food truck business has incurred these costs—maybe PPE, extra hand sanitizer, sneeze guards, or other proactive measures—then you can use your PPP loan to help with that.
If your business was damaged in the 2020 public disturbances, you can use your PPP loan to help cover any portion of the damages that were not covered by insurance.
Check out this article to help track your expenses: Tracking PPP expenses to maintain forgiveness (tools and tips!)
How can food truck or snack cart owners apply for PPP loan forgiveness?
After you have spent your PPP loan funds, you can (and definitely should!) apply for loan forgiveness. So long as you spend your PPP loan on the authorized expenses, you will likely receive forgiveness.
In order to receive forgiveness, you just need to apply through your lender within 10 months of the last day of your covered period. Ask them for the forgiveness application and gather any documentation that you might need to verify how you spent your PPP loan (bank statements, receipts, invoices, cancelled checks, etc.). Turn all of that back into your lender and they will process it with the SBA.
All of the communication for your loan forgiveness will go through your lender. Once a decision has been made, they will notify you.
Additional resources for PPP loan forgiveness:
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