The last stimulus bill, the American Rescue Plan Act, authorizes a new program, the Restaurant Revitalization Fund, to give $28.6 billion in grants to restaurants, bars, food trucks and other food and drink establishments based on their lost revenue during the pandemic. The program first will focus on businesses with less than $500,000 in revenue in 2019 and then will open up to all eligible entities.
The SBA is working to set up a platform for applying for the grants and for submitting the financial information necessary to obtain one. SBA expects to begin the program in April, and information will be posted on the SBA’s COVID-19 relief portal.
Service businesses interested in obtaining a grant should start working through the requirements now and should assemble the information needed to prove eligibility to be ready when the SBA web application launches. A description of the program requirements appears below.
The grant limits are $10 million per entity with a $5 million limit per physical location. Publicly traded entities and entities with over 20 locations are not eligible for the grants. A portion of the funds are set aside for smaller businesses, those with less than $500,000 of annual gross revenue.
The grants will not be taxable to the recipients and will not result in denial of deductions, reduction of tax attributes or denial of increases in basis because of the income exclusion. For partnerships or S corporations that receive a grant, any amount excluded from income is treated as tax-exempt income.
The type of entities eligible for the grants is broad. The Act defines “eligible entities” as “…a restaurant, food stand, food truck, food cart, 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 places of business in which the public or patrons assemble for the primary purpose of being served food or drink.”
The business must have suffered a “pandemic-related revenue loss”, determined by the difference in the amount the gross receipts of the eligible entity in 2020 as compared to 2019.
Permissible Uses of Funds
Businesses that receive a grant may use the funds during the period of February 15, 2020, through December 31, 2021, or within two years of enactment of the American Rescue Plan on March 11, 2021, if SBA allows it. Funds may be used for the following types of expenses incurred as a direct result of, or during, the COVID–19 pandemic:
- Payroll costs
- Payments of principal or interest on any mortgage obligation but not prepayments
- Rent payments, including rent under a lease agreement, but not prepayments of rent
- Maintenance expenses, including—
- (i) construction to accommodate outdoor seating; and
- (ii) 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 entity before the covered period
- Covered supplier costs
- Operational expenses
- Paid sick leave.
- Any other expenses the SBA determines are essential to maintaining the business
If the funds are not used during the covered period or if the business ceases operations, the business must return the unused funds to the Treasury.
The program has been praised by the National Restaurant Association as “…a win for the smallest and hardest hit restaurants that have sacrificed and innovated to continue to serve their communities.” This direct relief to the restaurant industry provides a significant and unprecedented economic boost to the many small businesses that have been hard hit by the pandemic. The National Restaurant Association estimates that sales in 2020 were down by $240 billion from expected levels.