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On May 3, 2021, the Small Business Administration (SBA) announced applications for priority businesses would start being accepted. In just two days, the Restaurant Revitalization Fund (RRF) received over 186,000 applications for the program. The high demand for funds is no surprise given the harsh toll the pandemic has taken on the industry. The Texas Restaurant Association reported that at the end of 2020, 15% of all Texas restaurants had permanently closed with more to follow. The need for additional working capital is clear especially now as widespread inoculation has meant more Texans are going out more. However, the application process is challenging requiring specific calculations, documentation and with a tiered application timeline, there are important details to consider. To help clients, prospects, and others, Calvetti Ferguson has provided a summary of the key program details below.

What is the Restaurant Revitalization Fund?

The RRF is a non-repayable federal grant which provides a minimum relief amount of $1,000 up to $5M per physical location and $10M per business. A physical location is defined as a permanent structure with a distinct address. For food trucks, the address would be the same as the company headquarters. Remember that only businesses in operation before March 10, 2021, can participate.

Like other SBA programs, the RRF has set aside certain amounts to ensure equal distribution of fund amounts. This means that $5B has been set aside for those with 2019 gross receipts less than $500,000, $4B set aside for those with $500,000 to $1.5M in gross receipts, and $500M for those with less than $50,000 in gross receipts.

Eligibility Rules

Only businesses that are not permanently closed and include operations where the public or patrons assemble for the primary purpose of being served food or drinks can apply. This includes restaurants, food trucks, food stands, caterers, bars, taverns, on-site producer facilities where the public may come to taste and purchase products, and snack and nonalcoholic beverage bars. Others such as bakeries, tasting rooms, taprooms, breweries, and micro-breweries must provide documentation that on-site sales to the public amounted to, at least, 33% of gross receipts in 2019. For those who opened in 2020, an alternate method must be followed. Conversely, golf clubs, places of gambling, strip clubs, and permanently closed businesses are not eligible.

RRF Calculation Methods

There are three calculation methods based on when a business commenced operations.

  • In Operation on January 1, 2019 – For these applicants, take the 2019 gross receipts and subtract from the 2020 gross receipts. Then subtract the total amount of disbursed PPP1 or PPP2 loans regardless of whether received in 2020 or 2021. Finally, if the amount exceeds $5M per physical location then reduce the amount to $5M.
  • Partial 2019 Sales – These applicants may use this calculation method or the one listed below. First, calculate the average monthly gross receipts for 2019, then subtract from 2020 gross receipts and subtract PPP loan funds regardless of whether received in 2020 or 2021. Finally, reduce the amount to $5M if it exceeds this amount per location.
  • Began Operations Between January 1, 2020, and March 11, 2021 – These applicants should calculate the total amount spent on eligible expenses between February 15, 2020, and March 11, 2021. Then subtract gross receipts earned between January 1, 2020, and March 11, 2021. Finally, subtract the amount of disbursed PPP loans and adjust to $5M per location, as necessary.

It is important to note when making calculations to exclude PPP, Economic Injury Disaster Loans (EIDL), EIDL Advances, state and local grants (funded the CARES Act), and SBA Section 1112 payments from gross receipt calculations.

Covered Expenses

Like other federal relief programs, RRF recipients may only spend awarded money on eligible expenses. These include payroll costs, business mortgage obligations, rent payments, utility expenses, outdoor seating/protection construction, supplies, costs of food and beverage, covered supplier costs, and business operating expenses (i.e., accounting, legal, marketing, licensing). There is a provision that allows recipients to pay past-due eligible expenses only if they were incurred beginning on February 15, 2020, and ending on March 11, 2023.

Application Process Overview

Unlike other SBA programs, there is an exclusive application period set aside for a priority group. This includes socially or economically disadvantaged individuals and small businesses that are at least 51% women or veteran-owned. The application acceptance date and timeline include:

  • Day 1 – Day 21 – The SBA will accept an application for all eligible businesses but will only process those from the priority group.
  • Days 22 through Fund Exhaustion – During this period, all applications will be accepted, reviewed and funds awarded based on approved calculation methods.

Since application acceptance started on May 3, 2021, non-priority applicants still have a few weeks before applications will be processed. However, it is a good idea to start preparing the application now. The SBA requires applications to be submitted through an online portal, so there is no official application available for download. However, they have provided access to a sample application (SBA Form 3172) to help borrowers become familiar with what is needed.

For detailed information on the application process, the SBA has conducted several webinars to help make the process easier for potential applicants.

Michael Arnell, CPA

Fort Worth Office Managing Partner

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The Restaurant Revitalization Fund offers an important source of working capital for Dallas and Houston restaurants on the path to recovery. Since general application acceptance starts soon, it is important to consult with a qualified advisor to guide you through the process. If you have questions about the information outlined above or need assistance, Calvetti Ferguson can help. 

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