Prompt Attention Necessary for Registrations Which Begin April 30
Congress created the Restaurant Revitalization Fund (Fund) as a part of the larger American Rescue Plan Act of 2021 (H.R. 1319) (Act), which President Biden signed into law last month with $28.6 billion allocated to the Fund under the Act. The U.S. Small Business Administration’s (SBA) grant program, created under the Act’s authority, will begin accepting applications on May 3, 2021 at 12:00 p.m. EST. In anticipation of the application window opening, the SBA is encouraging all qualifying food-service operators to begin registering for the program on April 30 at 9:00 a.m. EST when the registration window is scheduled to open. Because the SBA anticipates a great demand, prompt attention to these deadlines is required to successfully obtain monies from the Fund.
Restaurant Revitalization Fund Overview
The Fund will be available to “eligible entities” that had gross revenue deficits between 2019 and 2020. “Eligible entities” under the Act include restaurants, food stands, food trucks, food carts, caterers, saloons, inns, taverns, bars, lounges, brewpubs, tasting rooms, taprooms, and licensed facilities or premises of beverage alcohol producers, where the public may taste, sample, or purchase products.
The maximum grant under the program is $5 million per location and $10 million per restaurant group, which will include the eligible entity and any “affiliated businesses.” An “affiliated business” is deemed to be a business in which an eligible entity has an equity interest or right to profit distributions of not less than 50%, or in which an eligible entity has the contractual authority to control the direction of the business and such affiliation is determined based upon the arrangement that existed as of March 13, 2020. Entities that, together with any affiliated businesses, own more than 20 locations are not eligible under the program. Additionally, publicly traded companies, government-operated businesses, and Shuttered Venue Operators Grant Program pending applicants and recipients are also not considered eligible.
An applicant’s grant amount is determined by subtracting its 2020 gross revenues from its 2019 gross revenues, with a modified formula for any applicant not open for the entirety of 2019 or 2020. Any amounts received by applicants under the Paycheck Protection Program (PPP) from either a First or Second Draw Loan will be deducted from the applicant’s grant amount under the Fund.
Proceeds from the Fund can be used for an array of expenses, including, but not limited to, payroll expenses, paid sick leave, principal and interest payments on mortgage obligations, rent, utilities, maintenance and supply expenses, and other food and beverage expenses “within the scope of the normal business practice.” As long as the grant funds obtained under the program for allowable expenses are used for the aforementioned purposes, the grant recipient will not be required to repay any of the grant monies.
What Applicants Need to Know Before Applying
The SBA expects that the Fund will be exhausted in its entirety, so interested applicants should be prepared to apply as soon as possible. In order to be prepared, the SBA has stated that eligible entities should have the following documentation prepared in anticipation of the May 3 application submission window opening:
- SBA Form 3172 (sample can be found here)
- IRS Form 4506-T
- Gross receipts documentation: any of the following documents showing gross receipts and, if applicable, eligible expenses:
- Business tax returns (IRS Form 1120 or 1120-S);
- IRS Forms 1040 Schedule C; IRS Forms 1040 Schedule F;
- Bank statements from January 1, 2019 through current;
- Externally or internally prepared financial statements, such as income statements or profit/loss statements;
- Point of Sale Reports, including IRS Form 1099-K (e.g., transactions involving a payment settlement entity);
- For partnerships: IRS Form 1065, including K-1s;
- Brewpub / Bakery / Tasting Room / Taproom / Brewery / Winery / Distillery:
- Documents evidencing that onsite sales to the public comprise at least 33% of gross receipts for 2019, which may include Tax and Trade Bureau (TTB) Form 5130.9. For businesses that opened in 2020, the applicant’s original business model should have contemplated at least 33% of gross receipts in onsite sales to the public.
- Documents evidencing that onsite sales of food and beverage to the public comprise at least 33% of gross receipts for 2019. For businesses that opened in 2020, the applicant’s original business model should have contemplated at least 33% of gross receipts in onsite sales to the public.
Eligible entities under the program have until March 11, 2023 to use the grant funds. However, all eligible entities must report the amount of grant funds already used for each eligible use category no later than December 31, 2021; any applicants that do not fully expend the grant funds prior to December 31, 2021 must then complete annual reporting submissions until the grant funds have been fully expended or March 11, 2023, whichever is earlier.
The first 21 days of the program will prioritize eligible entities owned by women, socially and economically disadvantaged persons, and veterans. After the priority period, remaining funds will be distributed to eligible entities in the order in which applications are approved by the SBA. During the duration of the program, (1) $5 billion of the $28.6 billion will be set aside for those eligible entities with gross revenues of $500,000 or less in 2019, (2) $4 billion will be set aside for those eligible entities with gross revenues of $501,000 to $1,500,000 in 2019, and (3) $500 million will be set aside for those eligible entities with gross revenues of not more than $50,000 in 2019.
- Richard P. Eckman, Senior Counsel, TROUTMAN
- Jeremy B. Tomes, Associate, TROUTMAN
Compliments of Troutman Pepper LLP – a member of the EACCNY.