Howard Zangwill, CPA, Managing Director of Audit and Accounting in the Oakland office.
Howard ZangwillCPA / Managing Director of Audit and Accountingview bio

Darcy Illg
Darcy IllgManaging Director, Advisory Servicesview bio

Richard Dellefave, CPA / Principal in the RINA San Francisco office.
Richard DelleFaveCPA / Principalview bio

Chelsea MaemoriCPA / Audit Supervisorview bio

Financial Relief for Restaurants and Drinking Establishments is Coming!

Restaurant Owner

3/24/2021

The American Rescue Plan Act of 2021 (ARPA) provides substantial financial relief to the Restaurant industry.
 
The act appropriates $28.6 billion for the formation of a Restaurant Revitalization Fund (RRF) to issue grants to struggling restaurants. $5 billion is reserved for restaurants with gross receipts of $500,000 or less with the remaining $23.6 billion to be granted in an “equitable manner” to eligible entities.
 
The Small Business Administration (SBA) will administer the fund which will be disbursed as tax-free grants to restaurants, bars, and associated food and beverage related businesses to provide them with compensation for 2020’s diminished revenues.
 
RRF grant applications are not yet available. The SBA is committed to releasing them soon, but they have not provided a firm date.

Priority/Eligibility

During the first 21-day period of the program, the SBA will prioritize awarding grants to eligible entities owned by women, veterans, and businesses that are socially and economically disadvantaged.
 
The Act defines an eligible entity as “a restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, licensed facility or premises 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.”
 
Applicants must be able to demonstrate that customers frequent their business for “the primary purpose of being served food or drink” and must verify under penalty of perjury that “the uncertainty of current economic conditions makes necessary the grant request to support the ongoing operations of the eligible entity.”
 
Restaurants that are profitable and well capitalized will not be able to satisfy this requirement and may risk white-collar prosecution and penalties.
 
Eligible entities cannot previously have applied for or received a grant under section 324 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act.
 
In addition to qualifying as an eligible entity, a business must also show that they have suffered a pandemic-related loss by demonstrating that their gross receipts were reduced in 2020 vs. 2019 (for this calculation, PPP loan proceeds are considered revenues).
 
The bill also provides guidance for eligible entities that were not in operation for all of 2019 or just opened in 2020 to determine if they have suffered a pandemic related loss: the difference between—the product obtained by multiplying the average monthly gross receipts of the eligible entity in 2019 by 12; andthe product obtained by multiplying the average monthly gross receipts of the eligible entity in 2020 by 12.
 

Grant Amount

Under the Restaurant Revitalization Grant Program, the general provision is that an eligible business may receive an amount equal to the suffered pandemic loss, but not exceeding up to $10 million for each eligible entity or $5 million per physical business location.
 
To calculate the loss in revenue an eligible entity suffered in 2020 – subtract 2020 gross receipts from 2019 gross receipts. Please note that the loss amount must be reduced by the amount of loans received from either the First Draw or Second Draw of PPP loans in 2020 or 2021.
 
Also, Economic Injury Disaster Loans (EIDL) or funds received through the Employee Retention Tax Credit (ERTC) program can’t be considered for decreasing revenues.

Fund Usage

The ARPA lists the following eligible uses for the grants:

  • Payroll costs (not including employee compensation exceeding $100,000 per year) – note: payroll costs for the grant program do not include qualified wages under the ERTC or COBRA premiums
  • Payments of principal or interest on any mortgage obligation (which shall not include any prepayment of principal on a mortgage obligation).
  • Rent payments, including rent under a lease agreement (which shall not include any prepayment of rent)
  • Utilities
  • Maintenance expenses (including construction for outdoor seating, walls, floors, deck surfaces, furniture, fixtures, and equipment)
  • Supplies, including protective equipment and cleaning materials
  • Food and beverage expenses
  • Covered supplier costs
  • Operational expenses
  • Paid sick leave
  • Any other expenses as determined by SBA 

Fund Covered Period

As the bill is currently written, the “covered period” is scheduled to end on December 31, 2021, but the SBA may extend the covered period through March 11, 2023. Eligible entities must spend grant funds for eligible uses during the covered period.
 
Any grant funds that are not used for eligible uses during the covered period must be returned.

This is What You Can Do Now to Be Prepared

The SBA is expected to issue additional guidance and an application that will specify the process to access RRF grants soon. The government says the next steps are weeks, not months, away.

In advance of additional SBA guidance and release of a RRF application, business should ensure that they register to receive Data Universal Numbering System (DUNS) number, which is a nine-digit ID number that is necessary for registering on Grants.gov. They will also need to sign up with the System for Award Management (SAM).
 
In addition, you should gather the necessary financial information to show that you have suffered a pandemic-related loss.

Upcoming Webinar on Restaurant and Drinking Establishment Financial Relief Efforts

On Tuesday March 30th at 2pm (PDT), we will be presenting a webinar on recent financial relief available to restaurants and drinking establishments.  Some of the topics that will be discussed include:
• RRF Eligibility requirements
• How to calculate the available grant amount
• How restaurants and other business that serve food or beverages on site can use grant funds
• What you can do to prepare for the application process
• How to maximize PPP Round 2 and the ERC
 
You can register here, and more information on the online event is available here.

Please reach out to your RINA professional for additional information or if you have any questions.

 

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