The U.S. Small Business Administration (SBA) will administer a new program specifically to eligible entities in the restaurant and hospitality business sectors through the Restaurant Revitalization Fund.
An eligible entity means a restaurant, food stand, food truck, food car, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, 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.
Eligible entities Includes those described above as well as those located in an airport terminal or that is a tribally-owned concern. An eligible entity does not include an entity described above that is a State or local government-operated business; as of March 13, 2020, owns or operated more than 20 locations, regardless of whether those locations do business under the same or multiple names; or has a pending application for has received a shuttered venue operator grant; or a publicly-traded company.
An affiliated business means a business in which an eligible entity has an equity or right to profit distributions of not less than 50 percent, or in which an eligible entity has the contractual authority to control the direction of the business, provided that such affiliation shall be determined as of any arrangements or agreements in existence as of March 13, 2020.
The covered period will begin on February 15, 2020 and end on December 31, 2021 or a date to be determined by the Administrator that is not later than 2 years after the date of enactment of this section.
The Restaurant Revitalization Fund established under this provision will fund these grants and was allocated $28.6 Billion. This includes a breakdown of:
- $5 Billion will be allocated to eligible entities with gross receipts during 2019 of not more than $500,000.
- $23.6 Billion will be administered by the SBA in an equitable manner to eligible entities of different sizes based on annual gross receipts.
Eligible entities can qualify for a grant amount of the pandemic-related revenue loss. Pandemic-related revenue loss is calculated using gross receipts, as established using such verification documentation as the SBA may require, of the eligible entity during 2020 subtracted from the gross receipts of the entity in 2019, if the sum is greater than zero. If the entity was not in operation for the entirety of 2019 then the calculation is the difference between (1) multiply the average monthly gross receipts in 2019 by 12 and (2) multiplying the average monthly gross receipts in 2020 by 12. There may be other formulas determined by the SBA. The calculated amount of the grant will be reduced by any amounts received from a covered 7(a) SBA loan (First and Second Draw PPP loans are 7(a) SBA loans) in 2020 or 2021. There will also be calculations available for eligible entities that opened anytime between January 1, 2020 and the enactment date of the bill (March 11, 2021).
The maximum amount of the grant cannot exceed $10 million or $5 million per physical location of the eligible entity.
The grant funds can be used for the following expenses:
- Payroll costs
- Which do not include wages used in determining other credits or loan forgiveness amounts.
- Payments of principal or interest on any mortgage obligation (no prepayments of principal)
- Rent payments, including rent under a lease agreement (no prepayments 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
- Covered supplier costs
- Operational expenses
- Paid Sick Leave
- Any other expenses that the SBA determines to be essential to maintaining the eligible entity
If an eligible entity is not able to spend all the grant money received on these expenses, they will need to pay back the unused portion to the Treasury.
When applying for the grant the eligible entity will need to make good faith certifications that (i) the uncertainty of current economic conditions makes necessary the grant request to support ongoing operations, and (ii) the eligible entity has not applied for or received a grant under the Shuttered Venue Operators Grant.
There will be a priority timing in awarding grants. For the initial 21-day period that applications are being accepted by the SBA, they are to prioritize small business concerns owned and controlled by women, veterans, or socially and economically disadvantaged small business concerns. The SBA may take steps that are necessary to ensure that the entities described above have access to grant funding under this section after the end of the 21-day period. Those businesses that fall into this priority group will need to self-certify their eligibility of priority with the grant application submission.
Grants received will not be included in gross income and will not be denied deductibility of the expenses incurred by the eligible entity being covered by this grant. For partnerships and S-Corporations, the grant amount that is excluded as income will be treated as tax-exempt income.
The SBA is administering this program and we are awaiting additional guidance and applications from them and will continue to monitor updates and guidance released and provide that information to you.