Author: Jennifer Ortakales Dawkins and Emily Canal
Go to Source
The $28.6 billion federal grant program designed to support independent restaurants and bars closed Wednesday after running out of money.
More than 370,000 entrepreneurs applied for more than $75 billion in aid from the Restaurant Revitalization Fund — nearly three times what the program had available. The pandemic has dealt a tremendous blow to the restaurant industry nationwide, with government-mandated closures and restrictions. Food service sales in 2020 dropped by $240 billion, according to the National Restaurant Association.
Since many business owners didn’t receive the government aid they needed, industry groups are advising lawmakers to add funds to the program. And while there’s bipartisan backing for bills that would contribute another $60 billion to the Restaurant Revitalization Fund, the future is uncertain.
If the program gets more funding, here’s how business owners can apply.
Businesses may apply at the SBA’s portal here.
Eligible businesses must have lost revenue in 2020, compared to 2019
The primary function of the eligible small business must include serving and selling food or alcoholic beverages and 33% of 2019 sales must have been on site. This includes food trucks, stands, inns, taverns, lounges, brewpubs, caterers, and tasting rooms. Bars and restaurants that are located inside an airport terminal or tribal territory are also eligible.
Publicly-traded companies and firms that own, operate, or are affiliated with more than 20 locations are not eligible. A business cannot receive both an RRF grant and Shuttered Venue Operators Grant.
To be eligible for a grant, a restaurant or bar must demonstrate “pandemic-related revenue loss,” meaning gross receipts from 2020 are lower than those of 2019. If a business was not in operation for all of 2019, it will base this calculation on average monthly gross receipts in 2019 and 2020. There are also alternative calculations for businesses established in 2020 and 2021. If a business received a PPP loan, the amount awarded will be subtracted from the total revenue loss.
In addition to filling out the application form, businesses will need to provide an IRS 4506-T form and documentation of gross receipts, which can include tax returns, Schedule C, Schedule F, or bank statements. See the SBA’s guidelines for a full list of documents that fulfill this requirement, as well as additional documentation for breweries, wineries, bakeries, and inns.
Grant amounts cannot exceed $5 million per physical location
If a business is approved, the RRF grant will be for the amount of calculated revenue lost with a minimum funding amount of $1,000. The grant which cannot exceed $10 million per company, including affiliated entities with at least 50% stake. Eligible businesses may receive up to $5 million per physical location.
$5 billion of the total grant money will be set aside for businesses that made $500,000 or less in 2019 revenue.
Since these funds are grants, businesses will not need to pay them back as they would a loan. However, if a business does not use all the funds or permanently closes before the last day of the covered period, it must return the remaining balance.
Read more: How restaurant owners can cash in on PPP loans and get up to 3.5 times their monthly payroll
Restaurants can use the money on payroll and pandemic-related expenses
Businesses that receive a grant under the RRF may use the funds towards expenses incurred during the covered period, which the SBA defines as beginning on February 15, 2020 and ending on March 11, 2023.
Businesses may use these funds for the following expenses:
- payroll
- paid sick leave
- rent
- principle or interest payments on a mortgage (excluding prepayments)
- utilities
- cleaning supplies
- personal protection equipment (PPE)
- supplier costs
- operational costs
- food and beverage expenses that are necessary for business operations
- maintenance expenses such as construction for outdoor seating, walls, floors, deck surfaces, furniture, fixtures, and equipment
- any other expenses the SBA deems essential for maintaining the business
Businesses that receive RRF grants must report all eligible spending by December 31, 2021. If they have not used their entire funding by that time, they must submit annual reports until they’ve spent it all or until the end of the covered period. The SBA may ask for additional documentation to verify the use of funding.
The first 21 days of applications prioritized certified women- and veteran-owned businesses
The grants are administered by the SBA and awarded on a first-come-first-served basis. Applications opened on May 3 and businesses may apply until May 24. Business owners can see a sample application on the SBA’s website to know what information they will need to provide.
The first 21 days the SBA accepted applications, it prioritized certified small businesses owned and controlled by women, veterans, and those with social and economical disadvantages such as a lack of access to capital and credit.
The total $28.6 billion in grant funding set aside $5 billion to go to businesses with 2019 gross receipts of $500,000 or less, $4 billion to businesses with 2019 gross receipts from $500,001 to $1.5 million, and $500 million for businesses with 2019 gross receipts no more than $50,000.
SEE ALSO: How restaurant owners can cash in on PPP loans and get up to 3.5 times their monthly payroll
Join the conversation about this story »
NOW WATCH: Why ‘moist’ is one of the most hated words in the English language