Will You Qualify For A Slice Of The $28.6 Billion Restaurant Revitalization Grant (RRFG) Pie?
Included in the American Rescue Plan Act of 2021, was a special order of grant money that was specifically set aside for restaurants that have sustained financial losses resulting from the COVID-19 pandemic. The U.S. Small Business Administration (SBA), which is in charge of administering the funds, has been busy putting the final touches on the official application for the Restaurant Revitalization Fund Grants (RRFG) and, once it goes live, the government agency will begin taking orders, so to speak, on a first-come, first-served basis.
At this time, the SBA says it has the platform necessary to process loans quickly. A backlog is not expected and officials say they are confident they can handle the demand. During a Q&A session between a representative with the SBA and the Independent Restaurant Coalition, two weeks after applications and supplementary materials are posted online, the funds will begin to be distributed. Even so, it’s important to note that not everybody will receive assistance via the RRFG, simply because the grant doesn’t contain enough funds to meet the demand for financial assistance within the restaurant industry. However, according to the SBA, there could be another round of funding if Congress sees the demonstrated need in this first round.
How Much Is Up For Grabs?
“The current statute calls for $5 billion set aside for applicants with 2019 gross receipts of no more than $500,000,” states an article from Restaurant Hospitality. “The fund also has $500 million in grants set aside for gross receipts of not more than $50,000 (‘the smallest of the small’). There will also be $4 billion set aside for applicants with 2019 gross receipts of between $500,000 and $1.5 million.”
Gross receipts are defined by the SBA as meaning all revenue in whatever form received or accrued from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances. Your gross receipts will not include your net capital gains or losses. Nor will they include any taxes collected for and remitted to a taxing authority if included in gross (or total) income. This might include any sales taxes that were collected. For more insight into your gross receipts, reach out to your CPA for assistance.
Small Business Administration
According to the National Restaurant Association’s FAQ, when it comes to determining how much a particular entity may receive, the “SBA might create a minimum grant amount of $1,000 for eligible entities” while the “maximum grant amount is $5 million per location and $10 million total for the eligible entity.”
At this time, if you are able to get your hands on an RRFG, the money can be used for eligible expenses, including (but certainly not limited to) payroll, rent, utilities, maintenance expenses, PPE, food, and beverage expenses within the scope of your normal practice, covered supplier costs, paid sick leave, and operational expenses incurred from Feb. 15, 2020, until Dec. 31, 2021. However, if restaurants demonstrate continued need, the SBA may extend the covered period to include an additional 14 months, to March 11, 2023. Furthermore, the SBA has been given the authority to extend the program up to 2 years after the enactment of the RRFG program if necessary.
What Will The Restaurant Revitalization Grant Application Look Like?
It’s pretty basic and straightforward. If you are considering applying, it would be worth your time to take a look at the document to ensure you have compiled all the necessary information and can make quick work of the application process. In fact, I’ve reviewed the document myself and, as long as you have all the necessary information readily available, it might take only around 15 minutes to complete – a welcome change from the PPP application process.
If you are wondering what information you will need to complete this RRFG application, in preparation of the document’s official release, we would encourage you to pull together the following:
- Gross receipts
- If you were in business prior to Jan. 1, 2029, provide gross receipts for 2019 and 2020.
- If you were in business through part of 2019, provide gross receipts for 2019 and 2020.
- If you were in business between Jan. 1, 2020, and March 10, 2021, you must provide documentation of gross receipts and eligible expenses for the length of time in operation.
- If you have not opened your business yet as of March 11, 2021, but you have incurred eligible expenses, you must provide documentation of gross receipts and eligible expenses for the length of time in operation.
- Documents that show your gross receipts and (if applicable) eligible expenses. These might include:
- Business tax returns (IRS Form 1120 or IRS Form 1120-S)
- IRS Form 1040 Schedule C
- IRS Form 1040 Schedule F
- Partnership’s IRS Form 1065 (including K-1s)
- Bank statements
- Externally or internally prepared financial statements
- Income Statements
- Profit & Loss Statements
- Point of sale report(s), including IRS Form 1099-K
To be eligible for a Restaurant Revitalization Grant, your business must be one where the public or patrons are allowed to assemble for the primary purpose of being served food and/or drink.
RRFG Eligibility
If you are wondering if you will be eligible to apply for the RRFG, keep reading. We’ve broken down eligibility information as well as provided some answers to some other common questions.
What Types Of Businesses Are Eligible?
To be eligible for the RRFG, your business must be one where the public or patrons are allowed to assemble for the primary purpose of being served food and/or drink. This would include:
- Restaurants
- Food stands
- Food trucks
- Food carts
- Snack bars
- Nonalcoholic beverage bars
- Caterers
- Bars
- Lounges
- Saloons
- Taverns
- Licensed facilities or premises of a beverage alcohol producer where the public is allowed to taste, sample, or purchase products
- Other similar places of businesses in which the public or patrons are allowed to assemble for the primary purpose of being served food or alcohol.
Other entities, listed below, are also eligible for funding with certain limitations. However, in addition to eligibility will be limited to entities with onsite sales of food and beverage to the public of at least 33 percent of gross receipts, owners of the following entities may need to provide additional information when applying.
- Inns
- You may need to share evidence of your onsite sales.
- Breweries, brewpups, microbreweries, taprooms, and tasting rooms, bakeries, wineries, distilleries
- You may need to share filed Tax and Trade Bureau reports for the gross receipts reporting period.
Eligibility Clarifications
It’s also important to note that, to receive an RRFG, there is no requirement to meet that states your entity had to be open prior to a certain date. In fact, the grant language states that even if your entity was not open prior to Jan. 1, 2020, it is still eligible for the grant. Furthermore, even if your entity didn’t open by the application date, it can still apply for eligible expenses that may have been incurred in preparation for opening. According to the FAQ released by the National Restaurant Association, for entities opened or that were planning to open after Jan. 1, 2020, the grant fund eligibility generally follows a formula similar to:
[Eligible Expenses Incurred] – [Gross Receipts] – [PPP Loans] = RRFG Funding
As you can see from the formula presented above, your business is still eligible for RRFG funding even if you’ve already received the first-draw (and even the second-draw) Paycheck Protection Plan (PPP) loans. The only caveat is that the amount of your RRFG will be reduce by the total amount your PPP funding.
What Businesses Are Not Eligible For RRFG Relief?
Not all restaurants, bars, and similar entities will be eligible for a Restaurant Revitalization Grant as there are certain disqualifying circumstances. Your entity may be disqualified from RRFG eligibility if:
- As of March 13, 2020, you owned or operated more than 20 locations. This is regardless of whether your restaurant locations do business under the same name or different names.
- You have already received a Shuttered Venues Operations Grant (SVOG) or your application for this grant type is still pending.
- Yours is a publicly-traded corporation or is majority-owned and controlled by a publicly traded corporation.
- Your business entity is not primarily operating within the U.S., does not have a place of business within the U.S., and doesn’t make a significant contribution to the overall U.S. economy through the payment of taxes or use of American products, material, or labor.
- Your entity is owned or operated by a state- or local government.
- Your establishment is now permanently closed.
- You filed for bankruptcy under Chapter 7 or liquidated under Chapter 11.
- You have filed for bankruptcy under chapters 11, 12, or 13, but do not yet have an approved plan for reorganization.
Need Help?
For additional information and assistance, contact me directly at 234.249.3468 or email matthew.long@reacpa.com.
By Matt Long, CPA, MT (Wooster CPA Firm)
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