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As part of the Biden administration’s $1.9 trillion American Rescue Plan Act (ARPA), hard-hit independent restaurant operators will soon be able to get some relief from the effects of the COVID-19 pandemic. The Restaurant Revitalization Fund (RRF) is a federal program run through the Small Business Association that will provide tax-free grants specifically for the food services industry to help cover any pandemic-related revenue loss.
Wai-Chun Li, senior vice president and manager of the SBA Lending Department at East West Bank, says that eligible businesses should take advantage of this program if they can. “It is a grant instead of a loan, and you don't need to pay it back,” he says. Unlike the Paycheck Protection Program where businesses can get their loans forgiven but must go through the forgiveness process, the RRF does not require that extra step.
The SBA began accepting applications from all eligible businesses on May 3 at 12 p.m. ET through the application portal. The SBA is encouraging people to register for an account beforehand through restaurants.sba.gov starting April 30 at 9 a.m. ET (businesses that use Square or Toast do not need to register in advance). However, for the first 21 days of the program launch, the SBA will prioritize businesses “owned and controlled by women, veterans, or socially and economically disadvantaged small business concerns.”
Here is what you need to know about applying for a Restaurant Revitalization Fund grant.
The RRF provides $28.6 billion in grants for eligible food services businesses and has set aside funds for businesses that fall into different revenue groupings. Under ARPA, $5 billion of those funds will be earmarked for applicants with 2019 gross receipts of $500,000 or less. The RRF will also allocate $4 billion for businesses with 2019 gross receipts between $500,000 and $1.5 million, and $500 million for the smallest businesses with no more than $50,000 in 2019 gross receipts.
The SBA has capped the total amount a business and its affiliated businesses can receive at $10 million and is limited to $5 million per physical location, with a minimum grant size of $1,000.
According to the SBA, eligible businesses include:
The businesses marked with an asterisk are subject to further restrictions. According to John Morosco, a certified business advisor with the Washington Small Business Development Center, the denoted businesses must demonstrate that at least 33% of their 2019 gross sales came from “operational liquor and food sales, not wholesales.” Morosco adds that franchises also qualify, as long as they meet the other eligibility requirements listed by the SBA.
However, there are some criteria that may make a business ineligible for an RRF grant:
To calculate what size grant you qualify for, the SBA says to subtract your 2020 gross receipts from your 2019 gross receipts. If your business was not in operation for the entirety of 2019, then you multiply your average monthly gross receipts in 2019 by 12, and then subtract your total 2020 gross receipts from that.
If your business wasn’t in operation until 2020, then you can receive a grant equal to the total amount of eligible expenses subtracted by its gross receipts. If, by the application date, your business is still not in operation, you can still receive a grant equal to any eligible expenses you have made.
Businesses that have received Paycheck Protection Program loans still can receive grants from the Restaurant Revitalization Fund. However, the size of their RRF grant will be reduced by the total amount of PPP loan they received, regardless of whether or not it has been forgiven. Morosco adds that the RRF grant can also be used “in conjunction” with Economic Injury Disaster Loans and the employee retention tax credit, although the SBA has yet to clarify the exact way this will play out.
According to National Restaurant Association, if your business does not use the entirety of its grant by the end of the covered period, or if your business permanently closes before then, you will have to return the remaining funds.
The covered period for eligible expenses extends from February 15, 2020 to December 31, 2021, or a “date determined by the SBA” (the SBA is likely to extend the covered period until March 11, 2023). Businesses can use the grant money on the following expenses:
As with the SBA’s other COVID-19 relief programs, businesses will need to provide adequate documentation to prove their gross receipts. And it’s a good idea for businesses to get that information ready before the application portal opens, adds Li.
Currently, businesses are required to use IRS Form 4506-T to request tax return information, as well as “gross receipts documentation of gross or partial gross receipts of 2019, 2020,” says Morosco.
Allowable gross receipts documentation include:
For breweries, brewpubs, taprooms, tasting rooms, bakeries, and wineries, they will need additional documentation that shows 33% or more of their onsite sales was to the public. For inns, the SBA specifies that onsite sales of food and beverage need to have comprised 33% of gross receipts.
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