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The restaurant industry has remained one of the hardest-hit industries throughout the coronavirus pandemic. Lawmakers have provided assistance through the Paycheck Protection Program (PPP) and other support programs throughout this past year. That said, restaurants will be receiving some of the additional assistance they need through the Restaurant Revitalization Fund (RRF). The rollout of this program will be handled by the U.S. Small Business Administration (SBA), which has been a critical government organization in aiding small businesses during the pandemic. It looks like the SBA will continue to play a critical role, including assisting in post-recovery for small businesses, especially those most heavily impacted by this pandemic.
The purpose of this article is to break down the different components of the Restaurant Revitalization Fund that was incorporated into the American Rescue Plan Act. The program’s aspirations are to provide support for the hard-hit restaurant industry that has taken major revenue losses. This article will touch on some of the similarities and differences between the RRF and PPP programs. Most importantly, this article will provide details on some of the major aspects of the program focusing on eligibility, how funds can be used, application requirements, and more.
The Restaurant Revitalization Program was signed into law by President Joe Biden under the American Rescue Plan Act. Its purpose is to provide financial support for restaurant businesses that have been impacted by the COVID-19 pandemic. The Restaurant Revitalization Program applies only to eligible restaurants and other food and beverage businesses that have taken pandemic-related revenue losses. The SBA will continue to prioritize this program especially for food businesses owned by women, veterans, and socially and economically disadvantaged individuals. However, it is important to keep in mind that funds come on a first-come, first-serve basis.
At long last, restaurants are getting more targeted financial support through the newly established Restaurant Revitalization Fund that goes beyond the PPP program where PPP funds were focused on payroll costs and a few other operational expenses. The U.S. Treasury is providing $28.6 billion in funds for the Restaurant Revitalization Fund. Eligible entities will be able to apply for grants ranging from $1,000 to a maximum of $5 million per location. In total, entities will be able to apply for a maximum of $10 million.
The list of eligible businesses does provide some flexibility regarding what can be expected in the coming months. Section 5003 Part 4A provides an extensive list of eligible entities for this program, including the following food establishments: “food stand, food truck, food cart, caterers, tasting room, taproom, brewpubs, licensed facility of a beverage alcohol producer where the public may taste, sample, or purchase products, and such places where the primary purpose of being served food or drink.” In regard to brewpubs, taprooms, wineries, distilleries, and bakeries, there is one specific designation for eligibility that requires furthers documentation. According to the SBA’s page, these businesses will be required to furnish “[d]ocuments evidencing that onsite sales to the public comprise at least 33.00% of gross receipts for 2019, which may include Tax and Trade Bureau (TTB) Forms 5130.9 or TTB. For businesses who opened in 2020, the Applicant’s original business model should have contemplated at least 33.00% of gross receipts in onsite sales to the public.” As such, before applying, it is important to assess whether or not your individual business qualifies for the program.
The RRF Covered Period and Covered Expenses
Similar to the PPP program, the RRF also has a covered period. The covered period will start February 15 and end on December 31, 2021, or later depending on the Small Business Administration. The use of these funds must be used during the covered period. Similar to the Paycheck Protection Program, eligible expenses include payroll costs, mortgage obligations, rent payments, utilities, maintenance expenses (includes construction for outdoor seating, walls, equipment, and floors). The RRF will also include expenses relating to supplies including protective equipment and cleaning materials, food and beverage expenses, and supplier costs. In addition, it can cover operational expenses and paid sick leave.
Program Requirements and Funding
There are a number of documents required for the RRF application. Eligible applicants will need to submit bank statements, financial statements such as income statements or profit and loss statements, business tax returns, point of sale reports, and other IRS forms depending on the company’s setup. These materials will allow the SBA to verify the business and provide greater transparency. These documents will be very important for brewpubs, tasting rooms, wineries, distilleries, bakeries, or inns, since they will be a way to provide proof that at least 33% of the gross receipts of onsite sales are from the public enterprise.
The funding amount can be a bit complicated, but the SBA has provided some guidelines that take into consideration PPP loans, costs, and other variables.
- Calculation 1: for applicants in operation prior to or on January 1, 2019: 2019 gross receipts minus 2020 gross receipts minus PPP loan amounts
- Calculation 2: for applicants that began operations partially through 2019: (Average 2019 monthly gross receipts x 12) minus 2020 gross receipts minus PPP loan amounts
- Calculation 3: for applicants that began operations on or between January 1, 2020, and March 10, 2021, and applicants who have not yet opened but have incurred eligible expenses: Amount spent on eligible expenses between February 15, 2020, and March 11, 2021, minus 2020 gross receipts minus 2021 gross receipts (through March 11, 2021) minus PPP loan amounts.
- Entities who began operations part-way through 2019 may elect to use either calculation 2 or calculation 3.
Restaurant Revitalization Fund Loan Forgiveness
The most important aspect of this program is that grantees/borrowers will not need to repay these grants except for instances in which they used the funds for purposes other than those which are considered eligible. Like the PPP, the SBA will continue to provide further clarification on questions relating to PPP loans, grant money, and other issues. Nevertheless, small business owners must remain active and carefully review and comprehend the introduction of this new program.
With the creation and introduction of this program, the only question is when will this program start? Over the past couple of weeks, the SBA has run some test trials to the new program as it continues to address its other programs such as the Paycheck Protection Program, EIDL, etc. On April 27, 2021, SBA Administrator Isabella Guzman announced that registration will begin on April 30, 2021, which can be done through the RRF application portal. In addition, it will open applications for the Restaurant Revitalization Program on Monday, May 3, 2021. It is important for restaurant owners applying for this program to become familiar with the guidelines, application, and rules for the grants. The SBA has also published sample applications that are filled out to show small business owners how to apply.
With the introduction of the RRF, the restaurant industry will be able to acquire additional much-needed assistance during these trying times. Business entities can apply for grants that will not only help cover their payroll expenses but also their operational expenses ranging from supplier costs to mortgage obligations. The grant amount will vary from entity to entity based on the gross receipts and other financial statements that are essential for the RRF application.
If you need assistance compiling the necessary paperwork and documentation, as well as proving your business qualifies and meets the eligibility requirements, consider seeking out a certified public accountant (CPA) who specializes in assisting small businesses. They should be able to provide you with assistance in gathering and analyzing these materials.
The program will officially start in May of 2021, so there is still some time to begin prepping in advance. In the meantime, it is essential to review the program’s guidelines and application requirements. You should also begin compiling the required documents listed in order to be able to apply for the program. The National Restaurant Association, the SBA, and Biz2Credit will continue to provide guidance as this program begins and continues to evolve. As such, be sure to keep checking back here at our Biz2Credit blog for all the latest news and information.