The American Rescue Plan Act provides support for restaurants, bars, breweries, and other similar businesses, in the form of Restaurant Revitalization Grants administered by the Small Business Administration (SBA). The grants are funded by the Restaurant Revitalization Fund which has been appropriated $28.6 billion. The SBA has not yet officially launched the program because it is still working out the details and preparing the application form.
Below is a summary of the eligibility requirements. Because the SBA expects a deluge of applications once the program is launched, owners of restaurants, bars, and similar places of business who are interested in the program should be prepared to file as soon as possible after program launch. Accordingly, potential applicants should prepare now by familiarizing themselves with the program requirements, and determining their eligibility. We also recommend that potential applicants consult with their accountant now, so that they will be ready to apply the day the application becomes available.
The SBA originally indicated that applicants would have to use the System for Award Management portal for their applications. However we have since learned that will no longer be the case. It is now anticipated that the SBA will be using a third-party software vendor (as yet unselected) to manage the application process. The application process may be directly on the SBA website or via a link on SBA website to the vendor’s site. See Restaurants celebrate SBA dropping SAM registration process – ValueWalk. There is practical information and guidance here.
Summary of Restaurant Revitalization Grant Program
“Eligible entities” include restaurants, food stands, food trucks, food carts, caterers, saloons, inns, taverns, bars, lounges, brewpubs, tasting rooms, taprooms, and licensed facilities or premises of beverage alcohol producers where the public may taste, sample, or purchase products. In addition, other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink are eligible.
However, the following are not eligible:
- government entities,
- an entity with more than 20 locations,
- any entity that has a pending application for or has received a grant under the Grants For Shuttered Venue Operators program (in the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act), and
- any publicly traded company.
Grants are in amounts equal to the entity’s “pandemic-related revenue loss” (PRRL). For most entities, the PRRL is the gross receipts of the eligible entity in 2019 minus the gross receipts of the eligible entity during 2020, if greater than zero. The PRRL is different, however, for entities that were not in operation before 2019:
- if an entity was not in operation for the entirety of 2019, the pandemic-related revenue loss is the difference between average monthly gross receipts for 2019 and 2020 multiplied by 12;
- if an entity opened at any time from January 1, 2020 to March 10, 2021, the pandemic-related revenue loss is the total of certain expenses less any gross receipts;
- if an entity has incurred eligible expenses as of March 11, 2021 but has not yet commenced operations by the date of its grant application, the pandemic-related revenue loss is the amount of the expenses.
The ceiling on grants is $10,000,000 per eligible entity and $5,000,000 per location. Thus, an eligible entity with only one location would be limited to a $5,000,000 grant. PRRL for an eligible entity is reduced by any amount received from a covered loan made under the Paycheck Protection Program, including any Paycheck Protection Program second draw loan, in 2020 or 2021. Note also that if PRRL is over-estimated, then the excess must be returned to the Treasury when the actual PRRL amount is determined.
The entity must use the funds for eligible expenses during the “covered period,” from February 15 2020 to December 31, 2021. If the entity fails to use all grant funds or permanently ceases operations on or before the last day of the covered period, the eligible entity must return to the Treasury any unused funds.
In addition, to qualify, eligible entities must certify in good faith that:
- the uncertainty of current economic conditions makes necessary the grant request to support the ongoing operations of the eligible entity; and
- the eligible entity has not applied for or received a grant under the Grants For Shuttered Venue Operators program.
Funds may be used for the following expenses incurred as a direct result of, or during, the COVID–19 pandemic:
- Payroll costs (excluding qualified wages taken into account in determining any employee retention credit unde the CARES Act and any premiums taken into account in determining the credit allowed in connection with the Continuation Coverage Premium Assistance program).
- Payments of principal or interest on any mortgage obligation (excluding prepayments of principal).
- Rent payments, including rent under a lease agreement (excluding prepayment of rent).
- Maintenance expenses, including —
- construction to accommodate outdoor seating; and
- walls, floors, deck surfaces, furniture, fixtures, and equipment.
- Supplies, including protective equipment and cleaning materials.
- Food and beverage expenses that are within the scope of the normal business practice of the eligible entity before the covered period.
- Certain covered supplier costs.
- Operational expenses.
- Paid sick leave.
- Any other expenses that the SBA determines to be essential to maintaining the eligible entity.
In addition, the Rescue Plan Act provides that restaurant revitalization grants are excluded from gross income of the eligible entity and that no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of that exclusion from gross income.