SBA Announces Guidelines on Restaurant Revitalization Fund (“RRF”)
At Gettry Marcus CPA, P.C. we continue to stay up to date on the recent developments regarding the relief efforts put forth by Congress with respect to the COVID-19 pandemic. This past March, the SBA announced a new relief fund called the Restaurant Revitalization Fund program (“RRF” or the “Program”).
The RRF is a $28.6 billion dollar grant that provides funding for hard hit restaurants and bars. This fund is a component of the American Rescue Plan Act, which is a $1.9 trillion stimulus package signed into law by President Biden.
This past Saturday, April 17, 2021 the SBA published a Program Guide that provides guidance as to the eligibility, application and monitoring of the program. The mechanism for applying for the RRF is the SBA Form 3172.
During the initial 21 day period of the Program, the Program will only process applications from small businesses that are at least 51% owned by one or more individuals who are women, veterans, or socially and economically disadvantaged and if the management and daily business operations of the applicant are controlled by one or more women, veterans, or socially and economically disadvantaged individuals. From day 22 through the extinguishment of the fund, all applications will be processed for qualifying businesses.
The following is a list of certain key provisions contained in the Program Guide:
- Eligible entities include restaurants, food stands/trucks, caterers, bars/taverns, bakeries and brewpubs/tasting rooms/taprooms, breweries/microbreweries, wineries and distilleries, inns1, among others;
- Eligible entities must own/operate 20 or fewer establishments (with affiliates) regardless of ownership type and whether locations operate under the same/multiple names;
- Publicly-traded entities are ineligible;
- The amount of the RRF grant is reduced by any Paycheck Protection Program (“PPP”) proceeds;
- Obtaining SAM and DUNS numbers through the SAM.gov site are no longer necessary;
- Applicants must certify to economic need;
- Applicants cannot receive both an RRF grant and a Shuttered Venue Operator grant.
- Applicant Calculation:
- Generally, applicants can receive a tax-free grant equal to the amount of pandemic related revenue loss by subtracting its 2020 gross receipts from its 2019 gross receipts;
- There are special calculation rules for businesses not operating for the full year 2019, 2020 or 2021;
- Amounts are limited to $5 million per physical location, and $10 million per affiliated business group;
- RRF grants are reduced by PPP First Draw and Second Draw loans received.
- Eligible Application Options:
- Through SBA POS (“point of sale”) Restaurant Partner;
- Directly through SBA website which is restaurants.sba.gov; or
- Via telephone.
- Eligible Uses:
- Payroll costs (limitations for compensation exceeding $100K, on an annualized basis), including sick leave and costs related to the continuation of group health care;
- Payments on any mortgage obligation (both principal and interest);
- Business debt service;
- Utility payments;
- Maintenance (including walls, floors, deck surfaces, furniture, fixtures, and equipment);
- Construction of outdoor seating;
- Supplies, including protective equipment and cleaning materials;
- Food and beverage expenses, including raw materials for beer, wine, or spirits;
- Certain supplier costs; and
- Certain operating expenses, which is defined as normal business operations that are necessary and mandatory for the business (e.g. rent, equipment, supplies, inventory, accounting, training, legal, marketing, insurance, licenses, fees).
- Covered Period:
- Eligible expenses must be incurred from February 15, 2020 to March 11, 2023;
- If a business permanently closes, or does not spend all the funds, the remainder must be returned.
- Use of Funds Validation:
- Recipient has until March 11, 2023 to use award funds;
- Applicants are required to report through the application portal how much of their award has been used for each category by December 31, 2021 and then again by December 31, 2022 (if not utilized in full prior to December 31, 2022).
WHAT CAN BE COMPLETED BEFORE THE RRF COMMENCES
Applicants should prepare relevant financial information now to show pandemic related revenue loss in 2020 versus 2019. Preferably, but not mandatorily, applicants should have their 2020 corporate income tax return completed. Point of sale reports externally or internally prepared financial statements and bank statements can also provide the requisite support needed if the 2020 corporate income tax return has not been completed.
Please see the below link from the SBA site for additional information regarding the RRF:
If you would like additional information, please contact our Financial Assistance Services Group, the authors of this article.
- Bakeries, brewpubs, tasting rooms, taprooms, breweries, microbreweries, wineries and distilleries have separate requirements that the applicant must provide documentation that on-site sales to the public comprised at least 33% of gross receipts in 2019 (or if the applicant opened in 2020, that their original business model indicated such).