As leading advocates for client restaurants and bars seeking to recover unpaid insurance monies, Lieff Cabraser is gratified to announce that as part of the country’s new stimulus package, the SBA (Small Business Administration) is likely to open up Restaurant Revitalization Fund grant applications within the next few weeks.
The Small Business Administration is expected to open up Restaurant Revitalization Fund grant applications within weeks of President Biden signing the new stimulus package into law. The U.S. House of Representatives passed the $1.9 trillion American Rescue Plan March 17th, 2021, and the President is expected to sign the bill by Friday 3/19. In a press conference, Rep. Earl Blumenauer (D- Or.) announced that, “this is the start of the great American restaurant recovery.”
After the bill was initially voted on in the House March 1st, the Senate increased the amount of money for restaurants from an initial $25 billion to $28.6 billion. The funding will be divided into government grants with a maximum of $10 million per restaurant group or $5 million per individual restaurant location. “Eligible businesses” include foodservice and drinking establishments that are not part of an affiliated restaurant group with more than 20 locations and are not publicly traded. (Franchisees with fewer than 20 locations will be eligible to apply.)
When can restaurants/bars apply for a grant?
The Restaurant Revitalization Fund grants will be distributed by the SBA, much like the early Paycheck Protection Program funds. Once the bill is signed by President Biden and the SBA opens up applications, restaurants and bars with fewer than 20 locations that can demonstrate revenue loss over the past year will be able to apply on the SBA website. Guidance is expected to be published shortly after the American Rescue Plan becomes law.
How will grant amounts be calculated?
- For established restaurants that opened in 2018 or earlier, grants will be calculated by subtracting a business’ 2020 revenue from their 2019 revenue, and also subtracting first- and second-draw PPP loans received in 2020.
- For restaurants that opened in 2019, the average of 2019 monthly revenues will be multiplied by 12 minus the average of 2020 monthly revenues multiplied by 12, also subtracting first- and second-draw PPP loans received in 2020.
- Restaurants that opened in 2020 are eligible to receive funding equal to the “eligible expenses incurred” minus any first- and second-draw PPP loans received. Restaurants that had not yet opened are also eligible and can receive funding “equal to eligible expenses incurred before the date of enactment.”
The SBA can adjust awards based on demand and “relative local costs” in the markets where Restaurant Revitalization Fund businesses operate. Otherwise:
- $23.6 billion is available for the SBA to award in an equitable manner to businesses of different sizes based on annual gross receipts.
- $5 billion is available to businesses with gross receipts of $500,000 or less during 2019.
- Total grant amount for an eligible business and any affiliated businesses is capped at $10 million and is limited to $5 million per physical location of the business.
For an initial 21-day period, the SBA will prioritize awarding grants for small business concerns owned and controlled by women, veterans, or socially and economically disadvantaged small business concerns.
“Eligible expenses” are those incurred from February 15, 2020 to December 31, 2020 (or a date determined by the SBA).
Funds must be spent on payroll; principal or interest on mortgage obligations; rent; utilities; maintenance including construction to accommodate outdoor seating; supplies such as protective equipment and cleaning materials; normal food and beverage inventory; certain covered supplier costs; operational expenses; paid sick leave; and any other expenses the SBA determines to be essential to maintaining operations.
Grants are not taxed like income and all normal federal tax deductions are protected.
More information is expected to be released as the plan moves forward.