As part of the American Rescue Plan Act (ARPA), restaurants are eligible for additional further aid. While the Paycheck Protection Program (PPP) loans offered many a lifeline during the beginning of the pandemic, restaurants, in particular, struggled to access federal aid and have continued to struggle to get their businesses back to pre-pandemic levels
The Restaurant Revitalization Fund (RRF) targets small, minority-owned businesses, including women, veterans, and other economically disadvantaged groups. Different from the PPP, this funding does not have to be repaid or forgiven but businesses will validate each year how much has been spent. In addition, the grants, up to $10 million, come with no strings attached, other than using them on eligible expenses before March 11, 2023.
Am I eligible for the RRF?
Like many other forms of federal financial relief, the RRF can be combined with other grants and loans include the PPP and Economic Injury and Disaster Loans (EIDL). The RRF, though, has a much narrower scope for eligible businesses. Qualified applications include:
- Food stands, food trucks, food carts
- Bars, saloons, lounges, taverns
- Snack and nonalcoholic beverage bars
- Bakeries with onsite sales
- Wineries and distilleries with onsite sales
- Inns with onsite food sales
- Licensed facilities or premises of a beverage alcohol producer
Businesses should note that permanently closed locations are ineligible. Those filing for bankruptcy are also ineligible, except in cases of a reorganization.
For brewpubs, tasting rooms, taprooms, breweries, wineries, distilleries, or bakeries, applications should be prepared to demonstrate that onsite sales to the public constitute at least 33% of gross receipts for 2019. Businesses that opened in 2020 will need an original business model that considered at least 33% of gross receipts in public, onsite sales.
How do I apply?
Starting May 3, 2021, businesses can submit applications through the Small Business Administration (SBA) portal. Alternatively, companies using an SBA-recognized point of sale vendor may apply directly through them. These vendors include Square, Toast, Clover, NCR Corporation (Aloha). For those working with Square or Toast, additional registration through the SBA is not necessary.
In addition to the SBA application, applicants will need IRS Form 4506-T and gross receipts documentation:
- Business tax returns
- IRS Forms 1040 Schedule C
- Bank statements
- Externally or internally prepared financial statements
- Point of sale reports, including IRS Form 1099-K
When do I apply? Am I part of a priority group?
In an effort to support minority populations, the RRF will only process priority group applications during the first 21 days of the application period. While anyone may apply starting May 3, 2021, only those who self-certify as small businesses owned by women, veterans, or socially and economically disadvantaged individuals will receive funding during the first 21 days.
The SBA defines socially and economically disadvantaged individuals as:
- Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group, without regard to their individual qualities.
- Economically disadvantaged individuals are those socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities, as compared to others in the same business area who are not socially disadvantaged.
On May 31, 2021, or 21 days after the applications open, all eligible small businesses may receive funding. At that point, the SBA will approve applications in the order in which they were submitted.
How much will I receive?
The SBA created three distinct set-asides for applicants with varying amounts of 2019 gross receipts. $5 billion will be available for those with $500,000 or less in 2019 gross receipts. Gross receipts between $500,001 and $1,500,000 are allocated $4 billion. Small businesses with 2019 gross receipts less than $50,000 will pull from an additional $500 million set aside.
Keeping these set-asides in mind, applicants can calculate their funding amount by starting with their 2019 gross receipts per their tax return, and then subtract their 2020 gross receipts and all PPP loan disbursements. Their 2020 gross receipts should not include any Federal or local grants or other CARES funding, including but not limited to PPP funding or EIDL loans or grants. However, for businesses that started operations in the middle of 2019 or 2020, calculations look a little different:
- If your organization began operations in 2019:
- Calculate the annualized 2019 receipts based on your 2019 return.
- Total Gross receipts divided by number of months or partial months in operation
- Calculated 2019 monthly gross receipts x12, minus 2020 gross receipts, minus PPP loan amounts
- Calculate the annualized 2019 receipts based on your 2019 return.
- If your organization began operating between January 1, 2020 and March 10, 2021, or has not yet opened:
- Amount spent on eligible expenses between February 15, 2020 and March 11, 2021, minus 2020 gross receipts, minus 2021 gross receipts (through March 11, 2021), minus PPP loan amounts
While the SBA may fund up to $5 million per location, funding will not exceed $10 million for a single applicant or business.
What are eligible expenses?
Similar to other forms of federal aid, applicants may use the funds to pay many reasonable business costs, such as:
- Business payroll costs (including sick leave)
- Payments on any business mortgage obligation
- Business rent payments (not including prepayment of rent)
- Business debt service (both principal and interest; does not include any prepayment of principal or interest)
- Business utility payments
- Business maintenance expenses
- Construction of outdoor seating
- Business supplies (including protective equipment and cleaning materials)
- Business food and beverage expenses (including raw materials)
- Covered supplier costs
- Business operating expenses but only related to day-to-day activities
Understanding the RRF with Aldrich
The RRF is yet another way for eligible businesses to keep their doors open during the pandemic. Especially as new cases spike in many regions, restaurants are facing restrictions once again. If you have any questions about federal financial relief for your business, reach out to your Aldrich Advisor.
This article was written with the most current information as of April 29, 2021. Please check back for future updates.
Meet the Author
Director of Tax
Sara Northcutt, CPA
Aldrich CPAs + Advisors LLP
Sara Northcutt joined the firm in 2005 and has more than a decade of experience working on a wide range of clients, including financial lending, private equity, real estate, and other closely held businesses. Sara specializes in multi-state tax compliance. Sara received her Bachelor of Arts degree from Vanguard University of Southern California and did her…
- Closely-held businesses
- Certified Public Accountant
- Strategic tax planning and compliance