In March 2021, the American Rescue Plan Act of 2021 (the “Act”) was signed into law. The Act provides for $1.9 trillion of relief to many individuals and businesses overcoming the economic impact caused by the COVID-19 pandemic. Among the Act’s intended recipients are food service providers and adult beverage producers, who may be eligible for grants under the newly established Restaurant Revitalization Fund (the “Fund”). The Small Business Administration (“SBA”) will administer the Fund and distribute up to $28.6 billion in grants to eligible restaurants and similar establishments, $5 billion of which is preliminarily earmarked for eligible businesses with gross receipts during 2019 of not more than $500,000.
Which Businesses are Eligible?
As you might guess from the name of the Fund, restaurants are of course eligible. Eligible to receive a grant in addition to conventional restaurants are food stands, food trucks and carts, caterers, bars and saloons, taverns, inns, lounges, brewpubs, tasting rooms, taprooms, licensed facilities or premises 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, including those located in an airport terminal or businesses that are tribally-owned. As a result, the Fund may prove critical for many businesses, including struggling craft breweries, distilleries and wineries. While many businesses are eligible for a grant from the Fund, businesses with more than twenty locations, public companies and government-operated providers are ineligible. In addition, some live venue operators who applied for certain grants under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act are also ineligible.
How much Money can a Business Receive from the Fund and How must it be Spent?
A single-location business may receive a grant in an amount of up to $5 million. A business with two or more locations may receive a grant in an amount of up to $10 million. Generally, the amount a business will receive will be equal to the pandemic-related revenue loss of the business. In calculating the amount of the grant to a business, the SBA will generally compare a business’ 2019 and 2020 revenues.
Funds may be used in a similar manner to those funds received for Paycheck Protection Program (“PPP”) loans. That is, funds from a grant must be spent on certain payroll costs, payments of principal or interest on mortgage obligations, rent payments, utilities, maintenance expenses, supplies, food and beverage expenses, covered supplier costs, operational expenses, paid sick leave and any other expenses the SBA determines to be essential to maintaining the business. It is also important to note that funds must be used by December 31, 2021 or may need to be returned to the U.S. Treasury.
Can PPP Loan Recipients Receive Grants from the Fund?
Yes, an otherwise eligible business may receive a Fund grant even if it previously received a loan under the PPP; the SBA will deduct any PPP loan amounts from such grant, however. It is important to note that the Fund’s distributions are grants. By contrast, previous relief programs, such as the PPP, generally provided loans (though potentially forgivable loans) to eligible businesses.
How can a Business Apply for a Grant?
The SBA will administer the Fund’s distribution. Unfortunately, as of the date of this advisory, the SBA’s application process is not yet open. Nonetheless, we expect the application to be available on the SBA’s website and, once available, that applications will be submitted directly through the SBA’s website (as opposed to being submitted through approved banks as is the case for the PPP). Similar to that for the PPP, however, applicants will need to make a good faith certification along with their application that the uncertainty of current economic conditions makes necessary the grant request to support the ongoing operations of the business.
In addition, businesses owned and controlled by women and veterans and certain other socially and economically disadvantaged small businesses will receive priority for the first three weeks of the application period. Even if your business is not expected to receive priority, any eligible business should prepare to submit its application as soon as possible, as grants are otherwise made on a first-come first-served basis.