As of May 28, 2021, the Paycheck Protection Program has run out of funding. You can learn more about the PPP with our COVID-19 resource hub.

As vaccination rates sharply rise and more and more states move to partial or total reopening, restaurants are getting ready to get back into the full swing of things.

In response to the acute economic pain felt by restaurants, within the American Rescue Plan Act of 2021 the Biden administration included a program that specifically targets restaurants, bars, and other eligible businesses so that they can keep their doors open, continue employing their workers, and fully recover from the COVID-19 pandemic. This program, the U.S. Small Business Administration’s (SBA) Restaurant Revitalization Fund, is designed to provide emergency assistance to those food establishments hardest hit by the COVID-19 crisis.

We have put together a guide that analyzes the inner workings of the program, an analysis/reporting of how the launch of the program has gone, who is eligible for the funds, and the logistics of applying for and obtaining these loans.

What is the Restaurant Revitalization Fund?

The Restaurant Revitalization Fund (RRF) is a component of the American Rescue Plan designed to provide emergency funding to small and medium-sized restaurants and similar food-related businesses so they can “keep their doors open” and the economy gradually opens back up and the country undergoes its economic recovery.

The program has been allocated $28.6 billion that will be awarded through the SBA. The appropriated funds will remain available until totally expended. While there are reports of an oversubscription of funds, there are many active efforts to pressure Congress to appropriate more funds for the program in the wake of higher than expected demand.

The Financial Details

The program will provide restaurants with funding equal to their pandemic-related revenue loss up to $10 million per business, no more than $5 million per physical location, and at least $1,000. The SBA’s RRF program guide provides a step-by-step guide for five types of businesses:

  • Those who were in business on or before January 19th, 2019
  • Those who began making sales at some later time in 2019
  • Those who began making sales on or between January 1st, 2020 and March 10th, 2021
  • Those who have not yet opened as of March 11th, 2021 but have still incurred eligible expenses
  • Those who operate multiple locations that fall under multiple of the above categories (as long as the number of locations does not exceed 20)

Depending on where you fall in those categories, your calculation of “pandemic-related revenue losses” will be slightly different. Each type of applicant will want to have 2019 and 2020 gross receipts, whichever is applicable, as well as information about any Paycheck Protection Program (PPP) loan, Second Draw PPP loan, and SBA Economic Injury Disaster Loans (EIDL), as they form the bulk of the calculation source materials.

These funds, as long as they are used no later than March 11th, 2023, are not required to pay back. They are effectively grants from the SBA to small businesses, as long as they are used for eligible expenses in a timely manner. Any funds left unused by March 11th, 2023 will have to be returned to the government.

Here’s our summary of what is considered an eligible expense:

  • Payroll Costs: These include regular compensation, benefits, severance pay, and payroll taxes. For independent contractors, this includes wages, commissions, income, or net earnings from self-employment.
  • Mortgage or Rent Payments: This includes regularly scheduled payments for rent or mortgage principal and applicable interest. It does not include prepayment of rent or mortgage principal.
  • Debt Servicing: This includes payments for any other types of debts like equipment loans or lines of credit.
  • Utility and Maintenance Costs: This includes utility payments made before March 11th, 2021 and regular maintenance costs.
  • COVID-19 Adaptations: This includes the construction of new outdoor seating, purchasing personal protective equipment (PPE), and cleaning materials.
  • Food and Beverage Expenses: This includes regular supplier costs of materials for preparing food and beverages, including raw materials for producing beer, wine, or spirits.
  • Covered Supplier Costs: Expenses paid to suppliers for goods essential to business operations whose purchase is bound by a contract or purchase order within the covered period (February 15th, 2020 through March 11th, 2023).

Generally, these cover regular business operating expenses 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).”

The RRF program guide provides more comprehensive information about the details of eligible expenses that should be reviewed if there is any confusion. Importantly, this section of the guide also explicitly defines what is not considered an eligible expense, like payments to independent contractors.

Who is eligible?

Generally, businesses that serve food or alcohol are eligible. Specifically, these businesses are expected to typically receive most of their revenue through in-person services to the public. To satisfy this requirement, small business owners need to meet one of the following criteria:

  • At least a third of sales in 2019 were made on-site
  • The original business plan for those businesses opened in 2020 or who have not opened yet expected at least 33% of sales to be on-site

Here’s a full list from the SBA of the types of food businesses that would be eligible to apply:

  • Restaurants
  • Food stands, food trucks, food carts
  • Caterers
  • Bars, saloons, lounges, taverns
  • Snack and nonalcoholic beverage bars
  • Bakeries
  • Brewpubs, tasting rooms, taprooms
  • Breweries and/or microbreweries
  • Wineries and distilleries
  • Inns
  • Licensed facilities or premises of a beverage alcohol producer where the public may taste, sample, or purchase products

Importantly, eligible entities can also be non-standalone businesses like those located within an airport terminal, hotel, conference center, or similar situation.

The SBA also gives considerable time to describing the legal criteria to be considered an eligible applicant. For example, businesses must be organized as either a C corporation, S corporation, partnership, limited liability company (LLC), sole proprietorship, independent contractors, or be a tribal business. The business must also either be open, temporarily closed, or be planning to open. This article from Cohn Reznick, an accounting firm, does an excellent job of laying out these types of requirements in plain language.

How has the launch of the RRF program gone?

The SBA got to work relatively quickly since the program opened on May 3rd. By May 10th, over 16,000 applications had been approved and granted a total of over $2 billion in relief. Business owners began to see allocated funds in their commercial accounts on May 11th.

By May 12th, the SBA was reporting that the RRF had received over 147,000 applications had been received from priority groups (to be discussed later), and that the program was already oversubscribed at $29 billion (out of an available $28.6 billion). They also reported that efforts to target the smallest restaurants and underserved communities were successful.

Business owners, however, reported that the systems used to process applications were sometimes slow and they felt that reaching support was very time-consuming. Additionally, a few of the restaurant owners we spoke to stated concerns that they would be unable to receive funds due both to higher-than-expected demand and not being in the prioritized groups.

Overall, despite some of the usual hiccups of quickly launched government programs, it has been relatively easy for the SBA’s target populations of food business owners to prepare and submit applications as well as seamlessly receive funds that are approved.

How can small business owners apply and take advantage of the RRF?

Before we describe the application process, it’s important to address one aspect of the government’s distribution plan for the RRF. While all applicants can currently apply, for the first three weeks of the program the SBA will prioritize applications from small “businesses owned and controlled by women, veterans, and social and economically disadvantaged individuals”. After those 21 days, applications will be prioritized in the order in which they were received.

It also sets aside large chunks of funding based on an applicant’s size. $5 billion for those at or below $500,000 of 2019 gross receipts, $4 billion for those at or between $500,001 and $1,500,00 of 2019 gross receipts, and $500 million for those with no more than $50,000 of 2019 gross receipts. These earmarks mean that despite over subscription, there are plenty of funds left for those businesses that fall in those size ranges.

How to apply

Small business owners who have met eligibility can apply in one of three ways:

  1. Through a recognized SBA Restaurant Partner
  2. Through an online application directly with the SBA at restaurants.sba.gov
  3. Over the phone at (844) 279-8898

The SBA has a number of resources available to help with any form of application:

Through an SBA Restaurant Partner

The SBA has a number of developed partnerships with technology companies that provide the physical and digital infrastructure necessary for the restaurant industry in order to expedite and ensure equitable distribution of funds.

In the SBA’s RRF documents, they are referred to as the SBA’s Point-of-sale (POS) Restaurant Partners. These companies include Square, Toast, Clover, NCR Corporation (Aloha), and Oracle. These companies have set up capabilities for restaurant customers to calculate, validate, and make and submit applications. If you use one of these companies, the SBA strongly suggests applying through them.

Directly through the SBA

Applications can be made directly through the SBA, but they require a lot of manual calculation of award amounts and more documentation. There are step-by-step instructions in the RRF Program guide, so we won’t go over them here.

However, it’s important to be prepared with the required documentation, which applies to all applicants:

Applicants that are a brewpub, tasting room, taproom, brewery, winery, distillery, bakery, or and Inn will require documentation that verifies that at least 33% of sales happened onsite. This could be a 2019 Tax and Trade Bureau forms field or internally created reports.

Over the phone

All of the above steps, in this method, will be done over the phone with the help of an SBA support agent. Due to high demand for funds, this method is likely the slowest way to apply for RRF funds.

We don’t recommend it.

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