The President signed into law the American Rescue Plan Act of 2021 on Friday, March 11, 2021, which includes much-needed relief for restaurants and bars. The bill includes a $28.6 billion Restaurant Revitalization Fund that targets grants to small restaurants, initially prioritizing those controlled by women, veterans, and socially and economically disadvantaged individuals.
Eligible businesses include:
Essentially, any place of business where patrons assemble for the primary purpose of being served food or drink, including establishments located in an airport terminal or that are Tribally-owned.
The amount an eligible business can receive is equal to their pandemic-related revenue loss, which is the difference between their 2020 gross receipts and their 2019 gross receipts, reduced by any amounts received from the Paycheck Protection Program (PPP) First Draw and Second Draw loans.
For example, if a restaurant’s gross receipts went from $1 million in 2019 to $600,000 in 2020, and they have previously received $150,000 in PPP funds, then the business would be eligible for a $250,000 grant.
If a business began operations in 2019, then the business would need to annualize its average monthly gross receipts for 2019 and compare that to its annualized monthly gross receipts for 2020.
For example, a restaurant opened in July 2019 had average, monthly gross receipts from July to December of $100,000. In 2020 the same restaurant had gross receipts of $500,000 for the entire year. The eligible revenue loss would be $700,000 ($100,000 x 12 = $1,200,000 annualized 2019 gross receipts – $500,000 2020 gross receipts = $700,000).
If the business began operations in 2020, then there are no 2019 gross receipts to compare. These businesses will need to take the differences between qualified grant expenses (i.e., payroll, supplies, utilities, rents, etc.) and their gross receipts for 2020.
For example, a business started in February 2020 had total qualified expenditures of $700,000 and gross receipts of $500,000. It would be eligible for a $200,000 grant.
The total amount of grants an eligible entity or affiliated group can receive is $5,000,000 per location with a max of $10,000,000 in total.
The grant funds can be used for certain qualified expenditures related to the operations of the business from February 15, 2020 to December 31, 2021. Obviously we are well past February 15, 2020 so business owners can go back and retroactively apply eligible expenses against these grant funds. Essentially, these grants would reimburse restaurants for expenses from 2020 and help these same businesses pay for eligible expenditures through the end of 2021.
Eligible expenses include:
Eligible payroll costs do not include qualified wages used to obtain the Employee Retention Credit (ERC). Business owners may still claim the ERC for 2020 and 2021 but wages used in calculating the ERC cannot be paid with grant funds.
Unfortunately, not everyone who is eligible and applies for the grant will receive funds. The law only makes available $28.6 billion in funding compared to the more than $800 billion available through the PPP since the start of the pandemic. This program is extremely targeted and only certain groups of business owners will receive grants.
The bill includes $5 billion for eligible businesses with less than $500,000 in gross receipts in 2019, and the remaining $20 billion will be distributed by the SBA in an “equitable manner to eligible entities of different sizes based on annual gross receipts.”
During the initial 21-day period in which the SBA is awarding grants it must prioritize awarding grants to small businesses owned or controlled by women, veterans, or socially and economically disadvantaged businesses.
Finally, if after 60 days the funds have not been exhausted the SBA will have discretion to administer grants to eligible businesses without regard to annual gross receipts.
Applications will be administered through the SBA. The SBA indicated applicants will NOT need a DUNS number or registration with SAM.gov. More information on the application process is expected to be released early April.