A Guide to the Restaurant Revitalization Act

by Guest Contributor, 4 minutes read
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This is a guest post from Sam Novick, Senior Editor at Funding Circle.

2021 has been off to a rocky start for small businesses. Everything from PPP processing delays to political unrest has made it incredibly difficult for restaurants, retailers, and healthcare companies to recover from sharp revenue losses caused by the pandemic.

Fortunately, there's a spring-time ray of sunshine for restaurants and bars.

President Biden signed the latest COVID-19 stimulus package (known as the American Rescue Plan Act of 2021) on March 11, 2021. This act allocates $28.6 billion to the Restaurant Revitalization Fund program to provide tax-free grants to food and beverage businesses.

Restaurant Revitalization grants will provide restaurants with business funding equal to their pandemic-related revenue loss with up to $10 million per entity or $5 million per location.

However, with COVID restrictions still in place around the country, restaurants and bars are bleeding revenue. Tax-free grants are the perfect solution, but restaurant owners want to know when the funding will arrive and how much they can expect.

Keep reading for everything you need to know to take full advantage of the Restaurant Revitalization Fund.

When can restaurants expect funding from the Restaurant Revitalization Act?

The Small Business Administration (SBA) is targeting early April to begin the funding launch. The plan is to do a phased rollout:

  • Next 7 to 10 days: The SBA plans to begin posting Restaurant Revitalization Fund information (such as required documentation, guidance, deadlines, etc.) to give restaurant owners time to prepare.

  • Pilot/Prioritization phase: Funding will first launch to the smallest applicants (those with $500,000 or less in 2019 gross receipts). The SBA has set aside $5 billion for these applicants. Applications will be limited to these businesses for the first 21 days of the grant funding, with top-priority going to veterans, women, and socially and economically disadvantaged owners.

  • General phase: After the pilot/prioritization phase, the SBA will make the tax-free grants available more broadly for a 30- to 45-day period.

“We are focused like a laser on starting it up as quickly as possible,” said Patrick Kelley, associate administrator for the SBA’s Office of Capital Access. The SBA aims to build a platform that can leverage point-of-sale vendors to provide sales data that can automate portions of the grant calculation, application, and approval processes.

"By drafting off (the point-of-sale vendors) and posting our own web application, we believe we can reach the broadest market segment fast,” said Kelley.

Does your restaurant qualify for funding?

The Restaurant Revitalization Fund has a broad definition for eligible entities.

According to the American Rescue Plan Act of 2021, "eligible entity" means: "a restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, licensed facility or premise of a beverage alcohol producer where the public may taste, sample, or purchase products, or other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink."

Under that definition, practically any business that sells (or even samples) food or beverages is eligible for funding. Franchises are included, too.

"Independent restaurant owners have been uniquely impacted by the pandemic, whether there is a brand name on the front door or not," said Matthew Haller, senior vice president at International Franchise Association (IFA). "We appreciate the recognition that small franchise owners will have access to this critical program."

It's probably easier to look at the SBA's list of businesses that don't qualify:

  • State or local government-operated businesses

  • Businesses that own or operate more than 20 locations (even if those businesses have different names)

  • Businesses who've received (or have a pending application for) a grant under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act

Eligible restaurants and bars will also need documentation to prove they suffered a pandemic-related revenue loss. Businesses will need to provide receipts that show less gross income in 2020 than in 2019. Keep in mind that the SBA will consider any PPP funding you received (this year and last year) as part of your gross revenue for this calculation.

How much funding can my business receive?

Eligible businesses can receive funding equal to the amount of revenue loss the pandemic caused (up to $10 million for each entity or $5 million per physical location). Here's the calculation you'll use:

2019 Gross Receipts - 2020 Gross Receipts - PPP Loan Funding = Eligible Funding

The SBA doesn't factor in any funds you received from Economic Injury Disaster Loans (EIDL) or Employee Retention Tax Credits (ERTC) into your grant calculation.

How can I use my Restaurant Revitalization Fund grant?

The list of eligible expenses under the Restaurant Revitalization Fund is nearly identical to the PPP loan qualifications. You can use your Restaurant Revitalization Fund grant on the following:

  • Payroll costs: Salaries, tips, commissions, paid sick leave, etc.

  • Mortgage obligations: Payments of principal or interest for mortgage obligations.

  • Rent payments: Payments for property or equipment leases

  • Utilities: Gas, water, electricity, internet, etc.

  • Maintenance: Expenses to construct outdoor seating and maintain walls, floors, furniture, equipment, etc.

  • Supplies: Includes purchases for protective equipment and cleaning supplies.

  • Operational expenses: Includes purchases for accounting, payroll, and communications software.

Restaurants and bars have until the end of 2021 to use their grant funding. Any funds unused after December 31, 2021, will need to be returned.

What do I do now?

Applications haven't opened yet, so you'll want to spend your time getting your documentation ready. If you haven't applied for a government grant before, make sure you register to receive a DUNS number — you'll need this to submit your application.

Keep your eye out for coming changes. Rep. Earl Blumenauer believes the grant applications will open "within weeks, not months." More information will be coming soon.

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