Help is on the way. The $1.9 trillion American Rescue Plan Act, which President Biden signed into law on March 11, includes $28.6 billion in relief grants for restaurants through the Restaurant Revitalization Fund (RRF). These grants are tax-free, will not require repayment and are designed to cover pandemic-related revenue losses.
The U.S. Small Business Administration is in charge of the RRF program and has set a target of starting to accept applications in April. The exact timeline has not yet been announced and instructions and guidance on supporting documents have also not been released. While we wait to learn more, restaurant operators should already be thinking about applying.
Below is information to help you get ready. The answers to these frequently asked questions about RRF grants are based on information available as of April 9. Details may change as the SBA finalizes the rules for the grant program.
Am I eligible for an RRF grant?
The American Rescue Plan Act provides details about the type and size of eligible entities. These include:
- Must be a “restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brew pub, tasting room, tap room, licensed facility or premise of a beverage alcohol producer where the public may taste, sample, or purchase products, or other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink.”
- Open on or before Feb. 15, 2020.
- Applicant cannot own or operate more than 20 units.
- Not part of a publicly traded company.
- Has not received a Shuttered Venue Operators Grant.
- Must have lost revenue in 2020 versus 2019. (Entities that began operations in 2019 will be able to estimate annual revenue by using gross receipts for the months in operation.)
How much money is available?
The RRF will distribute $5 billion to eligible businesses with gross receipts of $500,000 or less during 2019, and the remaining $23.6 billion to eligible businesses of various sizes based on annual gross receipts. Here are some of the details:
- Grants will be up to $10 million and are limited to $5 million per physical location.
- Grants will be equal to the applicant’s 2019 gross receipts minus (a) the applicant’s 2020 gross receipts and (b) the amounts, if any, received under both first- and second-draw Paycheck Protection Program (PPP) loans. Unused portions of a PPP must be included in the calculations.
For example: An applicant would be eligible for a $3.5 million grant if its 2019 gross receipts were $11 million; its 2020 gross receipts were $3 million; and it received a $2 million and a $2.5 million PPP loan. (11 – 3 – 2 – 2.5 = 3.5).
- Establishments that were not in operation for all of 2019 may calculate estimated annual gross receipts by taking the monthly average for gross receipts for the months they were in business and multiplying it by 12.
For example: An applicant who opened a location on Sept. 1, 2019, and had gross receipts of $3.6 million would have a monthly average of $900,000 (3,600,000 / 4) and estimated annual gross receipts of $10.8 million (900,000 x 12).
Will I apply to my regular lender for a grant?
The U.S. Small Business Administration will be administering the fund and accepting applications through an online portal it is currently building. Unlike PPP loans, applicants will not apply for RRF grants directly to banks.
How can I spend the grant?
The American Rescue Plan Act identifies a wide range of eligible expenses. These expenses must be incurred during the covered period, which is defined as Feb. 15, 2020, to Dec. 31, 2021. Eligible expenses are:
- Rent payments, including rent under a lease agreement, and payments of principal or interest on any mortgage obligation.
- Maintenance, including new outdoor seating construction.
- Supplies, including personal protective equipment and cleaning materials.
- Food and beverage inventory.
- Covered supplier costs.
- Operational expenses.
- Paid sick leave.
- Any other expense essential to maintain operations.
Operators should note that RRF grants may not be used to cover the same expenses that were paid for with PPP, EIDL or ERTC funds. Also, if all grant funds are not spent by the business, or the business permanently closes before the end of the covered period, the business must return unused funds to the U.S. Treasury.
When will I be able to apply?
As of April 9, the SBA has not yet announced a date for launching the application process. We do know that for the first 21 days priority will be given to small business concerns owned and controlled by women, veterans, or socially and economically disadvantaged small business concerns. It is currently unknown if the administration will exclude any other applicants from receiving funds during this 21-day period.
Small applicants (those with revenues in 2019 of less than $500,000) are expected to have a 60-day period for applying for the $5 billion designated for small businesses. In other words, if applications open on May 15, 2021, this pool would be available until July 14, 2021. If there is any money from this $5 billion pool left, it will get added to the general pool for use by other applicants.
The remaining $23.6 billion will be available to all applicants once the program opens. Any applicant above $500,000 in 2019 revenue will be competing in this pool.
How should I get ready to apply?
While waiting for the application to become available, start gathering your documentation. You’ll need to prove your revenue loss using tax returns, financial statements, loan documentation if you received a PPP or other relief loans, etc. The National Restaurant Association said it expects that Form 4506-t Request for Transcript of Tax Return is likely to be required. Find information about the form here and download Form 4506-t here.
You will likely also need corporate organizational documents (articles of organization/incorporation, operating agreements, etc.) to prove when you began operating your business. Fortunately, it was recently announced you will not need to register with SAM.gov to receive a System of Award Management (SAM) number.
Finally, please note that the SBA is still in the rulemaking process and has the authority to changes details of the program. Keep a close eye out for news and information from the Washington Hospitality Association in the coming days. The association will keep you updated through our emails and will post details as they become available. You can register to be notified when new information is posted on the Association’s Coronavirus Resource Hub here.
- National Restaurant Association’s April 9 FAQ on the Restaurant Revitalization Fund Grants
- Washington Hospitality Association’s Coronavirus Resources for Restaurants
- Washington Hospitality Association’s Coronavirus Resources for Hotels
- Washington Hospitality Association’s Coronavirus Resources for Entertainment