The American Rescue Plan Act, passed this spring, allocated $28.6 billion to a Restaurant Revitalization Fund (RRF) to help restaurants on the road to recovery. The Small Business Administration (SBA) has recently revealed a sample form and program guide for applicants. If you have any questions on the process, reach out to an experienced accountant to walk you through the process.
How will the program work?
The RRF will provide tax-free grants for food and beverage venues that lost revenues in 2020.
Eligible establishments include restaurants, food trucks, bars, breweries, wineries, and bakeries. For some business types, at least 33 percent of 2019 gross receipts must have comprised on-site sales to the public. The requirements are a little different for businesses that started in 2020.
Eligible establishments have until March 11, 2023, to use the funds on qualified expenses.
Permitted uses of funds include:
- Payroll costs, including health, life, disability, vision, and dental benefits
- Business mortgage obligations
- Rent payments
- Debt service
- Utility expenses
- Maintenance expenses
- Construction of outdoor seating
- Business supplies
- Business food and beverage expenses
- Covered supplier costs
- Business operating expenses (e.g., equipment, accounting, training, legal, marketing)
Grant awardees will have to show that the funds they’ve received are being used on eligible expenses each year until the funds are exhausted. The SBA hasn’t yet released the process for expense validation.
To help with the application process, the SBA has partnered with technology companies that provide software, hardware, and payment services. Check with your POS system vendor or merchant processor, go directly to the SBA website, or call the SBA.
How much can I get?
The SBA had provided three calculation methods for businesses to use, depending on when the establishment began operating.
For businesses that were open for all of 2019 and 2020, the maximum amount they can receive is $5 million per restaurant or $10 million per restaurant group. The minimum amount is $1,000.
Calculation 1: Applicant was in operation prior to January 1, 2019
To calculate the grant amount, start with your 2019 gross receipts from your Federal tax return and subtract your 2020 gross receipts (as reported or expected to be reported on your 2020 return). Then subtract what, if anything, you received from the Paycheck Protection Program (PPP).
Calculation 2: Applicant began operation partially through 2019
To start, take your gross receipts from your 2019 Federal tax return and divide them by the number of months your restaurant was operating in 2020. Next, multiply the result by twelve. This number is your annualized 2019 gross receipts. Once you have your 2019 gross receipts, subtract your 2020 gross receipts and any PPP money you received.
Calculation 3: Applicant began operations between January 1, 2020, and March 10, 2021, OR Applicant has not opened as of March 11, 2021, but has incurred eligible expenses
Start with the total amount you spent on eligible expenses (see “How will the program work?” above) between February 15, 2020 and March 11, 2021. Then subtract your 2020 gross receipts, your 2021 gross receipts through March 11,2021, and any PPP money you received.
How can I apply?
Applications are now being accepted.
For the first twenty-one days of the program, the SBA will prioritize “small business concern” groups. These are establishments that are at least 51 percent owned by women, veterans, and socially and economically disadvantaged individuals.
Documents you need to apply include:
- SBA Form 3172
- IRS Form 4506-T
- Documentation showing gross receipts (business tax returns 1120, 1120S, 1065, 1040 Schedule C, bank statements, externally or internally prepared Profit and Loss Statements, Point of Sale reports, and 1099-Ks)
- Some businesses need documentation showing on-site sales to the public made up at least 33 percent of gross receipts for 2019
For additional information, click here.