The American Rescue Plan Act of 2021 (ARPA), signed by President Biden on March 11, 2021, provided over $25 billion to a Restaurant Revitalization Fund, administered by the U.S. Small Business Administration. Under this bill, restaurants, food trucks, lounges, bars and other eligible entities will be eligible to receive a grant of up to $10 million and are limited to $5 million per physical location.
Eligible entities must have been open on or before February 15, 2020, cannot own or operate more than 20 units and are not publicly traded companies. For multi-unit franchises, the 20-unit cap applies across the brand. The funds are intended to support many of the smaller restaurants across the country. The funds will be distributed among eligible businesses as follows:
- $5 billion to eligible businesses with gross receipts of $500,000 or less during 2019
- $20 billion to eligible businesses of various sizes based on annual gross receipts
Grant amounts will be calculated based on the amount of pandemic-related revenue loss of the eligible business during 2019. To determine this amount the 2020 gross receipts of the applicant will be deducted from its 2019 gross receipts. If an eligible business was not in operation for all of 2019, the total would be the difference between 12 times the average monthly gross receipts of 2019 and the average monthly gross receipts for 2020. Pandemic-related revenue losses are reduced by any amounts received from PPP loans in 2020 and/or 2021.
Example:
An eligible entity had gross revenues of $5 million in 2019, gross revenues of $2.5 million in 2020, a PPP Round 1 Draw of $500,000 and a PPP Round 2 Draw of $750,000, the calculation for the grant is as follows:
2019 Gross Revenue $5,000,000
Less: 2020 Gross Revenue ($2,500,000)
Total Pandemic Related Losses: $2,500,000
Less: Round 1 PPP Draw: $500,000
Less: Round 2 PPP Draw: $750,000
Maximum RRF Grant amount: $1,250,000
If an eligible business opened in 2020, the grant is equal to the amount of eligible expenses reduced by any gross receipts received and any PPP Draws received in 2020 and 2021. Funding from Economic Injury Disaster Loans (EIDL) and Employee Retention Tax Credit (ERTC) will not be counted towards 2020 revenues.
During the covered period, grant funds may be used for the following eligible expenses incurred as a direct result of, or during the pandemic:
- Payroll costs
- Rent
- Utilities
- Maintenance expenses
- Supplies
- F&B expenses that are within the scope of normal business practice
- Operational expenses
- Paid sick leave
- Outdoor seating construction
- Personal Protective Equipment (PPE)
- Cleaning Materials
- Any other expenses that the SBA Administrator determines to be essential to maintaining the eligible business
It’s important to note that PPP, EIDL and ERC are not used to cover the same expenses as the RRF grant proceeds.
If an eligible business receives a grant and fails to use all grant funds or permanently ceases operations on or before the last day of the covered period (December 31, 2021), the unused funds will be returned to the Treasury.
These grants will be prioritized by the SBA to eligible businesses owned and controlled by women, small businesses owned and controlled by veterans, or socially and economically disadvantaged small businesses.
This grant will be available directly from the SBA. More information regarding the grant process and application will be released by the SBA in the coming weeks. Eligible restaurants should take steps now to start organizing the documents and information necessary to submit an application once it is available.
