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Key Takeaways of the Restaurant Revitalization Fund

June 18, 2021, 8:01 AM

On March 11, 2021, the American Rescue Plan Act (ARPA) established the $28.6 billion Restaurant Revitalization Fund (RRF) to provide relief to restaurants and other eligible businesses that suffered Covid-19 related revenue losses.

Eligible businesses can obtain up to $5 million per physical location in grant funds and up to $10 million per business for businesses with up to 20 locations. Recipients are not required to repay if funds are used for eligible costs by no later than March 11, 2023. This relief program was designed to provide financial assistance to businesses that experienced pandemic-related revenue losses and disruption to their normal operations due to the restrictions and impact of Covid-19.

The U.S. Small Business Administration (SBA) is administrating this program. The SBA has released guidance to help eligible businesses navigate the application process and provides guidance for priority groups—eligible women-owned business, veteran-owned, and socially and economically disadvantaged individuals. Applicants must certify on the application that they meet eligibility requirements.

RRF funds granted to businesses can be used for recurring operating expenses incurred in the normal course of business. Allowable use of funds includes amounts used for business payroll costs, debt service, rent, utility payments, maintenance, construction costs for outdoor seating, supplies, raw material costs, covered supplier costs, and covered operating expenses. This is a key distinction from the Paycheck Protection Program (PPP), which limited the use of funds to certain eligible payroll and non-payroll costs.

In addition, the RRF expands the covered period to utilize funds to cover expenses incurred from Feb. 15, 2020, to March 11, 2023, if these expenses were not claimed under the PPP forgiveness process. This flexibility in the use of the funds allows business owners to revisit their business plans and align the use of funds with desired short-term and long-term goals as businesses continue to adapt to the “new” normal.

Eligible businesses who have experienced pandemic-related revenue losses include restaurants, caterers, food trucks, carts, and other food establishments, as well as expanded categories defined by the SBA, including bakeries, breweries, brewpubs, and inns that can support in the application that at least 33% of gross receipts for 2019 were onsite sales of food and beverages to the public. RRF is available to businesses partially opened in 2019, new in 2020, and newly opened businesses, as long as they were in operations prior to March 11, 2021.

The RRF interacts with PPP, and for business to calculate the maximum grant amount, it excludes funds received from the first and second round of PPP, amounts received from Economic Injury Disaster Loans and advances, state and local grants, and SBA Cares Act Section 1112 payments. The employer retention credit, “ERC,” is not an excluded amount from gross receipts, and businesses can receive eligible credits without impacting the calculation of the grant. However, any qualified wages utilized for ERC cannot be claimed as eligible expenses for RRF. In addition, RRF and PPP have unique definitions for affiliated businesses and aggregation rules when determining eligibility under each program, and therefore need to be analyzed separately.

RRF applications can be submitted directly with the SBA or via SBA-recognized point-of-sale (POS) vendors. Businesses need to provide documentation to support eligibility, grant calculation, and to provide good faith certifications for receiving the funds. The SBA began accepting applications on May 3 but gave notice that they would only process and fund to priority groups during day 1 through 21. The SBA will accept applications from all eligible applicants and process applications beginning on day 22 through exhaustion.

Businesses receiving RRF funds will have the opportunity not only to recuperate lost cash flow, but to also re-invest cash flow to generate longer-term returns. Despite the unplanned losses and decline in business triggered by Covid-19, business owners were forced to adapt. These uncertain times pressed decision makers to reinvent their businesses, explore new business models, revise their value proposition to survive and keep businesses afloat. Now, it’s the time for business to develop a sustainable business plan that is aligned with the business short-term and longer-term goals. Small businesses should work with their advisors to explore these plans and establish a sustainable go-forward strategy!

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Sofia Cordero is a manager at Mazars USA LLP, New York.

Bloomberg Tax Insights articles are written by experienced practitioners, academics, and policy experts discussing developments and current issues in taxation. To contribute, please contact us at TaxInsights@bloombergindustry.com.

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