COVID-19: PPP & EIDL Loan Information

Restaurant Revitalizations Grants

Introduction

The American Rescue Act of 2021 was signed into law on March 11, 2021 by President Biden. Included in this bill is $28.6 billion for the new Restaurant Revitalization Grants program (RRG). These grants do not need to be repaid.

While this blog provide a general outline of the new RRG program, businesses must wait for the SBA to issue new regulations, instructions, and FAQs to gain a full understanding of this bill.

Eligible Businesses

This new grant program will be available to those businesses with the primary purpose of serving food or drink to their patrons. This includes restaurants, food stands, food trucks, food carts, caterers, saloons, inns, taverns, bars, lounges, brewpubs, tasting rooms, and taprooms. It will include food service businesses in airport terminals and Tribally-owned businesses.

Ineligible Businesses

The following food service businesses that are not eligible include:

  • State or local government-operated food businesses.
  • Businesses that own or operate more than 20 locations as of March 13, 2020.
  • Businesses that have received a SVOG grant.
  • Publicly-traded companies.

RRG Covered Period

The RRG Covered Period is from February 15, 2020 and ending on December 31, 2021, however, the SBA can adjust the end date of the RRG Covered Period by up to two years but no later than December 31, 2023.

Calculation of Grants

There are four methods for calculating a RRG grant depending on when the eligible entity started operations. Congress has given the SBA authority to determine how these formula will work to ensure that funds are distributed to those eligible entities most impacted by the pandemic, which may vary from the examples below.

RRG grants will be reduced by the amount of any 2020 and 2021 PPP loans received by the eligible entity and will be capped at $10 million for an eligible entity and its affiliates and capped at $5 million for each physical location of an eligible entity.

Option A

If an eligible entity was in business on or before January 1, 2019, they would calculate their pandemic-related revenue loss by subtracting their total 2020 Gross Receipts from their total 2019 Gross Receipts. The pandemic-related revenue loss would be reduced by any PPP loans that the eligible entity received. The RRG grant would be the lessor of the adjusted pandemic-related revenue loss and $5 million per physical location of the eligible entity.

Gross Receipts for 2019 a $450,000
Less: Gross Receipts for 2020 b 250,000
Less: First Draw PPP Loan c 62,500
Less: Second Draw PPP Loan d 87,500
Adjusted pandemic-related revenue loss (a-b-c-d) e 50,000
Physical location maximum amount f 5,000,000
Restaurant Revitalization Grant (lessor of e and f) g $50,000
Option B

If an eligible entity started operations during 2019, they would calculate their pandemic-related revenue loss by subtracting their annualized 2020 Gross Receipts (2019 actual Gross Receipts divided by the number of months in operations multiply by 12) from their annualized 2019 Gross Receipts (2020 actual Gross Receipts divided by the number of months in operations multiply by 12).

The pandemic-related revenue loss would be reduced by any PPP loans that the eligible entity received. The RRG grant would be the lessor of the adjusted pandemic-related revenue loss or $5 million per physical location of the eligible entity.

Actual Gross Receipts # of Months
Annualized Gross Receipts for 2019 $321,000 8 a $481,500
Less: Annualized Gross Receipts for 2020 309,000 12 b 309,500
Less: First Draw PPP Loan c 62,500
Less: Second Draw PPP Loan d 87,500
Adjusted pandemic-related revenue loss (a-b-c-d) e 50,000
Physical location maximum amount f 5,000,000
Restaurant Revitalization Grant (lessor of e and f) g $50,000
Option C

If an eligible entity started operations during the period beginning on January 1, 2020 and ending on the date of enactment of the RRG program, they would calculate their pandemic-related revenue loss by total eligible costs minus Gross Receipts incurred during that period.

The pandemic-related revenue loss would be reduced by any PPP loans that the eligible entity received. The RRG grant would be the lessor of the adjusted pandemic-related revenue loss or $5 million per physical location of the eligible entity.

Eligible costs from January 1, 2020 to RRG start date a $250,000
Less: Gross Receipts from January 1, 2020 to RRG start date b 50,000
Less: First Draw PPP Loan c 62,500
Less: Second Draw PPP Loan d 87,500
Adjusted pandemic-related revenue loss (a-b-c-d) e 50,000
Physical location maximum amount f 5,000,000
Restaurant Revitalization Grant (lessor of e and f) g $50,000
Option D

If an eligible entity has not yet opened for business as of the date of their RRG grant application, their pandemic-related revenue loss would equal their eligible costs incurred prior to the date of the enactment of the RRG program.*

The pandemic-related revenue loss would be reduced by any PPP loans that the eligible entity received. The RRG grant would be the lessor of the adjusted pandemic-related revenue loss or $5 million per physical location of the eligible entity.

Eligible costs from January 1, 2020 to RRG start date a $250,000
Less: First Draw PPP Loan b 62,500
Less: Second Draw PPP Loan c 100,000
Adjusted pandemic-related revenue loss (a-b-c) d 100,500
Physical location maximum amount e 5,000,000
Restaurant Revitalization Grant (lessor of d and e) f $100,000

Priority in Awarding Grants

During the initial 21 days, the SBA will prioritize awarding grants to:

The Act requires $5 billion of the $28.5 billion allocated to RRG grants be made available to eligible entities with 2019 Gross Receipts of not more than $500,000.

Grants after the Initial Period

After 60 days of the enactment of the RRG grants, the SBA may make grants to any eligible entity regardless of the annual Gross Receipts of the eligible Entity.

Use of Funds

During the RRG Covered Period, an eligible entity may use the grant funds for the following costs incurred as a direct result of or during the COVID-19 pandemic:

  1. Payroll Costs as defined under the PPP program excluding Employee Retention Credits and COBRA Credits.
  2. Payments of principal and interest of mortgage obligations (prepayment are not allowed)
  3. Rent payments (prepayment are not allowed)
  4. Utilities
  5. Maintenance expenses including construction of outdoor seating, walls, floors, deck surfaces, furniture, fixtures and equipment.
  6. Supplies, including protective equipment and clean materials.
  7. Food and beverage expenses within the scope of normal business practices.
  8. Covered suppliers costs as defined under the PPP program.
  9. Operational expenses
  10. Paid sick leave.

Return of Funds

If the eligible entity does not used all of the grant funds by the last day of the RRG Covered Period, the funds must be returned to the Treasury.

Tax Treatment of RRG Grants

The RRG grant is non-taxable income for Federal income tax purposes. The RRG eligible costs are deductible business expenses for Federal income tax purposes.

Getting Ready to Apply for a RRF Grant

The SBA will most likely use the same application platform that they are using for the SVOG grant program. This means that you will need a DUNS number so you can then register in the System for Award Management SAM.gov) before you will be able to apply for a RRG grant.

Photo by Shawn Ang on Unsplash


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