Restaurants and other dining establishments may soon feast on grant funds designed for that industry, according to the Small Business Administration (SBA). As we have noted previously, section 5003 of the American Rescue Plan Act of 2021 established the Restaurant Revitalization Fund (RFF), a $28.6 billion grant program for qualifying dining establishments, referred to as “eligible entities.” This alert highlights new information about this grant program based on fresh guidance from the SBA.
What Is Known About the RFF Right Now?
On Saturday, April 17, the SBA promulgated a long-awaited official Program Guide, memorializing previous statements about RFF requirements to industry partners and providing new details.
First, confirming widespread industry reporting, the Program Guide states that RFF applicants need not register for a Data Universal Numbering System (DUNS) number or a Commercial and Government Entity (CAGE) code, or register on SAM.gov. This is consistent with the American Rescue Plan’s admonition to the SBA to avoid “imposing additional burdens on applicants” and prioritize using “existing business identifiers over requiring other forms of registration that may not be common” to the industry.
The American Rescue Plan provides that the covered period in which to use funds would span the period from February 15, 2020 to December 31, 2021, or a date of the SBA administrator’s choosing that is no later than two years after the statute was enacted. The Program Guide highlights that awardees must spend all of their grant funds by March 11, 2023, confirming earlier statements to that effect given during a recent recorded town hall featuring the SBA and an industry group.
The new guidance document also addresses the RFF’s 21-day priority period for small business concerns owned or controlled by women or veterans, or that are socially and economically disadvantaged. Applicants may self-certify that at least 51% of their businesses are owned by women, veterans, or those who are socially and economically disadvantaged, and they have considerable flexibility to meet the 51% threshold. For example, if a business is co-owned by five individuals, two of whom are women, and one of whom is a veteran, then the business would be considered 60% owned by listed priority groups and would qualify for priority consideration.
The Program Guide clarifies that there are three grant payment calculations, which depend on when an applicant was in operation. According to the first calculation, for entities in operation before 2019, their potential RFF grants would equal:
- (2019 gross receipts) minus (2020 gross receipts) minus (the amount of any PPP loans received)
Under the second calculation, entities that opened in 2019 may receive grants equal to:
- (Average 2019 monthly gross receipts × 12) minus (2020 gross receipts) minus (the amount of any PPP loans)
Finally, applicants that have yet to open but have already incurred eligible expenses and applicants that opened between January 1, 2020 and March 10, 2021 should rely on the third calculation:
- (The amount spent on eligible expenses between February 15, 2020 and March 10, 2021) minus (2020 gross receipts) minus (the amount of any PPP loans)
For 2019 the third calculation is their average monthly gross receipts in 2019 multiplied by 12, minus their average monthly gross receipts of 2020 multiplied by 12 and any PPP loans received. Finally, entities that opened during the period from 2020 to 2021 may receive a grant equal to eligible expenses, minus gross receipts and any PPP loans received
The Program Guide further clarifies that applicants must supplement their application with certain documents to substantiate their gross receipts. Applicants may rely on such documents as:
- Business tax returns for 2019 and 2020 (IRS Form 1120 or IRS 1120-S)
- IRS Form 1040 Schedule C; IRS Form 1040 Schedule F
- IRS Form 1065 (including K-1s), if the applicant is a partnership
- Externally or internally prepared financial statements, such as income statements or profit and loss statements
- Bank statements
- Point of sale report(s), including IRS Form 1099-K
Applicants will also need to complete an IRS Form 4506-T for the SBA to verify their tax information; Form 4506-T can be completed on the SBA’s online grant platform, but having a completed copy ready will ensure swift completion of the application.
The Program Guide also provides some reassurance for entities pursuing certain types of bankruptcy. Applicants that are operating under an approved plan of reorganization under a Chapter 11, 12, or 13 bankruptcy and are not being managed by a trustee are still eligible for grant funds. Those without an approved plan of reorganization are not eligible, nor are applicants that filed for a Chapter 7 bankruptcy or that are liquidating under Chapter 11.
The new guidance also requires certain classes of applicants to provide additional documentation about their gross receipts. Specifically, brew pubs, tasting rooms, taprooms, breweries, wineries, distilleries, bakeries, and inns must demonstrate that their onsite sales of food and beverages comprise at least 33% of gross receipts for all years listed in their funding calculations.
Finally, the Program Guide presents potential applicants with three different methods of applying, in contrast to the SBA’s other pandemic relief programs. As noted, businesses may apply via the SBA’s online grant platform, which will eventually be available at restaurants.sba.gov. Businesses that may face difficulty applying online may opt to do so telephonically at 844.279.8898. The last way to apply is through an SBA Restaurant Partner’s website or secure portal. According to the Program Guide, the SBA has partnered with “recognized technology companies that provide software, hardware & payments services to the restaurant industry,” to “make it easier for applicants to calculate, validate, and submit applications to the SBA.” Applicants that already patronize an SBA Restaurant Partner may apply via the Partner’s own customized process, and may even save time preparing and processing the application! In a recent press release, the SBA announced that Clover®, NCR Corporation, Square, and Toast are already Restaurant Partners, and that additional Partners may be approved soon.
When Can Eligible Entities Apply?
The SBA recently announced that interested applicants may register for the application portal on Friday, April 30, at 9 a.m. Eastern and that SBA will accept applications beginning Monday, May 3, at 12 p.m. Industry groups and the SBA predict that the $26.8 billion allocated for the RFF will be woefully inadequate to meet demand from struggling dining establishments, which means that many applicants will not receive any funding. Whether Congress will appropriate more money to satiate the industry’s hunger for RFF grants is unknown, so it is recommended that interested applicants prepare well before SBA launches the live application. We will continue to monitor the situation for additional legislative developments and guidance.