SBA Releases Restaurant Revitalization Program Guidelines
Posted in Legal Bites
SBA Releases Restaurant Revitalization Program Guidelines

On Saturday, April 17, 2021, the Small Business Administration (“SBA”) released its much-anticipated guidelines for the Restaurant Revitalization Fund.

On April 13, 2021, during a town hall with the Independent Restaurant Coalition, SBA associate administrator Patrick Kelley stated that the program was not robust enough to serve all eligible applicants and urged administrators to apply on the first day the program opens. He suggested that a demonstration of strong demand could lead to Congress opening additional funding for the program.

Eligible Entities

Eligible entities that have experienced pandemic-related revenue loss include:

  • Restaurants
  • Food stands, food trucks, food carts
  • Caterers
  • Bars, saloons, lounges, taverns
  • Snack and nonalcoholic beverage bars
  • Bakeries (onsite sales to the public comprise at least 33% of gross receipts)
  • Brewpubs, tasting rooms, taprooms (onsite sales to the public comprise at least 33% of gross receipts)
  • Breweries and/or microbreweries (onsite sales to the public comprise at least 33% of gross receipts)
  • Wineries and distilleries (onsite sales to the public comprise at least 33% of gross receipts)
  • Inns (onsite sales of food and beverage to the public comprise at least 33% of gross receipts)
  • Licensed facilities or premises of a beverage alcohol producer where the public may taste, sample or purchase products

For entities with multiple locations, a restaurant with multiple locations under the same EIN must apply for all locations in one single application. Applicants may not apply on behalf of other entities, such as affiliates or subsidiaries.

Grant Amount

The SBA has more clearly defined payment calculations in three categories, based on whether the entity was in operation before January 1, 2021. These calculations are described in greater detail in the full set of guidelines.

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 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 PPP loan amounts

Entities that began operations partially through 2019 may elect at their own discretion to use either calculation 2 or calculation 3.

The grants will be for a minimum of $1,000 and a maximum of $5 million per location, not to exceed $10 million total for the applicant and any affiliated businesses.

Note, that under the guidance, restaurants with pending PPP loans should “withdraw any outstanding PPP application” upon applying for Restaurant Revitalization funding.

Use of Grant Funds

Awardees must use all Restaurant Revitalization funds by March 11, 2023 on eligible expenses incurred beginning on February 15, 2020 and ending on March 11, 2023. If the business permanently closes, the covered period will end when the business permanently closes or on March 11, 2023, whichever occurs sooner. Awardees that are unable to use all Restaurant Revitalization funds on eligible expenses by the end of the covered period must return any unused funds to the government (post-award guidance to follow this guide).

Grant funds may be used for the following categories of expenses:

  • Business payroll costs, including sick leave and costs related to the continuation of group health care, life, disability, vision or dental benefits during periods of paid sick, medical or family leave, and group health care, life, disability, vision or dental insurance premiums;
  • Payments on any business mortgage obligation (both principal and interest; note: this does not include any prepayment of principal on a mortgage obligation);
  • Business rent payments, including rent under a lease agreement (note: this does not include any prepayment of rent);
  • Business debt service (both principal and interest; note: this does not include any prepayment of principal or interest);
  • Business utility payments for the distribution of electricity, gas, water, telephone or internet access, or any other utility that is used in the ordinary course of business for which service began before March 11, 2021;
  • Business maintenance expenses, including maintenance on walls, floors, deck surfaces, furniture, fixtures and equipment;
  • Construction of outdoor seating;
  • Business supplies, including protective equipment and cleaning materials;
  • Business food and beverage expenses, including raw materials for beer, wine or spirits;
  • Covered supplier costs, which is an expenditure made by the eligible entity to a supplier of goods for the supply of goods that:
    • Are essential to the operations of the entity at the time at which the expenditure is made; and
    • Is made pursuant to a contract, order or purchase order in effect at any time before the receipt of Restaurant Revitalization funds; or
    • With respect to perishable goods, a contract, order or purchase order in effect before or at any time during the covered period;
  • Business operating expenses, which are defined as business expenses incurred through normal business operations that are necessary and mandatory for the business (e.g. rent, equipment, supplies, inventory, accounting, training, legal, marketing, insurance, licenses, fees). Business operating expenses do not include expenses that occur outside of a company’s day-to-day activities.

Under the SBA guidance, past-due expenses are eligible if they were incurred beginning on February 15, 2020 and ending on March 11, 2023.

Application and Required Documentation

The SBA included a sample grant application for the program. Eligible businesses can apply through an SBA-recognized Point of Sale Restaurant Partner or directly via the SBA’s online application portal. This portal is not yet open and the guidelines do not specify the date that the portal will be open.

Required documentation for restaurants includes:

  • Verification for Tax Information: IRS Form 4506-T, completed and signed by Applicant. Completion of this form digitally on the SBA platform will satisfy this requirement.
  • Gross Receipts Documentation: Any of the following documents demonstrating gross receipts and, if applicable, eligible expenses:
    • Business tax returns (IRS Form 1120 or IRS 1120-S)
    • IRS Forms 1040 Schedule C; IRS Forms 1040 Schedule F
    • For a partnership: partnership’s IRS Form 1065 (including K-1s)
    • Bank statements
    • Externally or internally prepared financial statements, such as Income Statements or Profit and Loss Statements
    • Point of sale report(s), including IRS Form 1099-K

Additional documentation is required for inn, tasting room, brewery, taproom, winery, distillery, brewpub and bakery applicants, as specified here.

For the first three weeks of the program, the SBA will accept applications from all eligible applicants, but only process and fund priority group applications. Based on the SBA administrator’s statements regarding program demand, all eligible businesses are encouraged to apply immediately.

Priority Groups

The SBA defines priority groups as a small business concern that is at least 51 percent owned by one or more individuals who are:

  • Women, or
  • Veterans, or
  • Socially and economically disadvantaged (see below).
  • Applicants must self-certify on the application that they meet eligibility requirements
  • Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.
  • Economically disadvantaged individuals are those socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged.

SBA Set-Asides

  • $5 billion is set aside for applicants with 2019 gross receipts of not more than $500,000
  • An additional $4 billion is set aside for applicants with 2019 gross receipts from $500,001 to $1,500,000
  • An additional $500 million is set aside for applicants with 2019 gross receipts of not more than $50,000
  • Pooja S. Nair
    Partner

    Pooja S. Nair is a business litigator and problem solver with a focus on the food and beverage sector. She advises food and beverage clients, startups and other businesses on a comprehensive range of issues, including employment ...

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