Restaurant Revitalization Fund Draft Application Released by the SBA
By: Kyle P. Graham
On March 11, the American Rescue Plan Act of 2021 (ARPA) created the $28.6 billion Restaurant Revitalization Fund (RRF) to provide grants to restaurants sustaining financial losses due to the COVID-19 pandemic. Under this program, an entity that owns a place of business where the public or patrons assemble for the primary purpose of being served food or drink can receive a tax-free federal grant equal to the amount of its pandemic-related revenue loss. Applicants can apply for a minimum grant amount of $1,000, and a maximum grant amount of $5 million per location and $10 million total for an eligible entity. The U.S. Small Business Administration (SBA) is administering the program and will be issuing the necessary federal rules, regulations, and applications before grant funds are distributed. Currently, the program is expected to launch in late April.
As part of its efforts to finalize and unveil program, the SBA has released a draft application form, together with a letter to the Office of Management and Budget asking for emergency review of the materials. While the application is merely in draft form, it is believed that the finalized application will largely reflect the information included in the current document. Thus, the draft application helps shed some light on the specifics of the program and what information business owners should have available when applying for the RRF grants.
For instance, the draft application shows that the SBA plans to maximize the covered period under which businesses can spend grant proceeds. The ARPA identifies a covered period of February 15, 2020 to December 31, 2021, however it also gives the SBA the ability to expand the covered period to no later than two years after the legislation was passed. The current draft application indicates that the SBA intends to maximize the covered period so that businesses can spend grant proceeds through March 11, 2023.
Further, the draft application provides additional details on the group of applicants given priority under the program. During the first 21 days of the program, the ARPA gives priority to applications for businesses owned by women, veterans, and/or socially and economically disadvantaged individuals. Pursuant to the draft application, the applicant must be at least 51% owned and controlled by individuals who are women, veterans, and/or socially and economically disadvantaged individuals in order to receive priority treatment.
Additionally, businesses must not be permanently closed to qualify for the program. Businesses that have declared bankruptcy but have an approved reorganization plan are still eligible to receive RRF grants. However, if a business has declared bankruptcy but does not have a plan for reorganization, or has filed for a liquidation, the business will not be eligible for the program.
The draft application also details the documentation required to be submitted when applying for a RRF grant. All applications must include:
- a completed application form;
- a completed IRS Form 4506-T; and
- documentation demonstrating gross receipts, such as business tax returns, IRS Forms 1040 Schedule C and Schedule F, bank statements, externally or internally prepared financial statements, and point of sale reports. Paycheck Protection Program (PPP) proceeds are removed from gross income for purposes of calculating gross receipts in the application.
Additionally, applicants from businesses defined as brewpubs, tasting rooms, taprooms, breweries, wineries, distilleries, bakeries, and inns must supply additional documentation evidencing onsite sales to the public comprise at least 33% of gross receipts. In total, the application is expected to take about 45 minutes to complete.
Further guidance by the SBA is expected as the program nears its launch date Though the application is not “live,” applicants would do well to gather the required information in advance so they have everything ready when the program does go live, especially since the $28.6 billion ear-marked for the program is not expected to last long. In the meantime, the draft application is available for review and can be found at https://omb.report/icr/202104-3245-001.
Kyle Graham is an attorney at the Cleveland, OH-based law firm McCarthy, Lebit, Crystal & Liffman Co., LPA.