ARPA grants $ 28.6 billion in aid to the restaurant industry

The hospitality industry has been hit particularly hard during the COVID-19 pandemic, but help is in sight for struggling restaurants and bars. On March 11, President Joe Biden enacted the American Rescue Plan Act of 2021 (Act), a $ 1.9 trillion stimulus bill that includes $ 28.6 billion for a Restaurant Revitalization Fund. (RRF).

Title V, Section 5003 of the act authorizes the Small Business Administration (SBA) to provide grants of up to $ 10 million in total ($ 5 million in total per location) to eligible entities and their affiliated businesses to cover costs. losses related to the pandemic.

Which companies are eligible for RRF grants?

“Eligible entities” are broadly defined as companies where “the public or patrons meet to the primary goal to be served food Where drink “and include:

  • Restaurants

  • Food stands and food trucks

  • Caterers

  • Saloons, inns, taverns, bars, lounges, brasseries, tasting rooms and taprooms

  • Facilities or licensed premises of an alcoholic beverage producer where the public can taste, taste or purchase products

It would appear that nightclubs, concert halls, concert halls and other places of entertainment are not included, even if they serve food or drink, as the main purpose of people frequenting these companies is not is not to be served food or drink. However, such entities may be eligible to receive grants of Article 324 of the Law on Economic Assistance to Small Businesses, Non-Profit Organizations and Badly Affected Sites.

Eligible entities also include “affiliated companies”, which are defined as companies in which the eligible entity has capital or a right to profit distributions of at least 50% or has the contractual right to control the company. . (The interest or the right of control must have existed on March 13, 2020.)

Which companies are not eligible for RRF grants?

  • Listed companies

  • Entities (as well as any affiliated companies) that operate more than 20 sites under the same name or under different names

  • Any entity that has a pending application or has received a grant under Section 324 of the Law on Economic Assistance to Small Businesses, Nonprofits, and Hard-Affected Sites (commonly referred to as an Operator Grant closed sites)

What assistance can an eligible entity obtain?

The amount of any grant is limited to the “pandemic-related loss of revenue” of the eligible entity, which is defined as one of the following:

  • 2020 gross receipts subtracted from 2019 gross receipts, if the sum is greater than zero; Where

  • If the entity has not been in business for the entire year 2019, the difference between the product of its average monthly gross revenues in 2019 multiplied by 12, and the product of its average monthly gross revenues in 2020 multiplied by 12; Where

  • If the entity opened during the period beginning January 1, 2020 and ending the day before the law was enacted, the amount of its payroll (which has the same meaning as in the CARES law) minus its revenue gross during this period; Where

  • If the entity has not yet opened on the date of its grant application, the amount of its salary costs incurred on the date of the Law.

In all cases, the amount of an entity’s “pandemic revenue losses” is reduced by the amount of Paycheck Protection Program (PPP) or PPP Second Draw loans granted to the entity in 2020 or 2021.

Grants are capped

The total amount of grants awarded to any eligible entity and its affiliates is capped at $ 10 million and $ 5 million per physical location of the entity.

What can the grants be used for?

During the period beginning February 15, 2020 and ending December 31, 2021, grant funds can only be used for the following expenses incurred “as a direct result of or during the COVID-19 pandemic” and include items following:

  • Staff costs (as this term is defined in the CARES Act for PPP loans)

  • Principal and interest payments on a mortgage (but not a prepayment of principal)

  • To rent

  • Utilities

  • Maintenance costs, including the costs of constructing and furnishing the outdoor seats

  • Supplies, including PPE and cleaning products

  • Food and beverage expenses that are part of the normal course of business of the qualifying entity before February 15, 2020

  • Supplier costs covered (as this term is defined in the CARES law for PPP loans)

  • Operational expenses

  • Paid sick leave

  • Any other element determined by the SBA as essential to the maintenance of the eligible entity

Fund return

Grant funds must be returned in the event that:

  • The entity’s loss of income related to the pandemic is estimated in its grant application and the estimate overestimates the losses; Where

  • The entity closes its doors before having used all grant funds; Where

  • The entity does not use all grant funds before December 31, 2021 or a date set by the SBA, which cannot be more than two years after the date the law was passed.

Required certifications

Entities requesting grants must certify in good faith in their requests that:

  • The uncertainty of the current economic conditions makes it necessary to apply for a grant to support the ongoing operations of the eligible entity;

  • The eligible entity has not applied for or received a grant under section 324 of the Law on Economic Assistance to Small Businesses, Non-Profit Organizations and Hard-Affected Sites; and

  • As long as the priority search for the request as described above, the eligible entity is eligible for priority.

Limitations on grant awards during the initial period after promulgation

In the first 60 days after the law comes into force, $ 5 billion of the RRF is earmarked for grants to eligible entities whose gross revenues in 2019 do not exceed $ 500,000. The remaining $ 23.6 billion is available during this period for “the Trustee to provide grants … equitably to eligible entities of different sizes on the basis of gross revenue.” After this initial 60-day period, the SBA is free to make grants to eligible entities, regardless of annual gross revenues. Note that the law appears to allow the SBA to lengthen or shorten this initial period as it sees fit.

Grant priorities

During the initial 21 day period during which the SBA makes grants (note that the period is not the same as the initial 60 day period described above which begins to run on the date of promulgation) , it must prioritize small businesses. owned by women or ex-combatants, and socially and economically disadvantaged small businesses. After this 21-day period, the SBA is required to award grants in the order of receipt of applications, but “may” take steps to ensure that these applicants have access to RRF grants. Applicants should be aware that given the limited funds allocated to the RRF, applications should be submitted as soon as possible.

There are still many open questions about the RRF, including questions about when eligible entities can start applying, what applications will require, and whether the SBA will change any of the criteria set out in the law. The Much team will monitor developments and provide updates as they become available.

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Cecil N. Messick