on Apr 23, 2021

The Restaurant Revitalization Fund: What local economic development stakeholders should know

Written by Erman Eruz

Applications open soon for the $28.6 billion Restaurant Revitalization Fund (RRF), which will provide grants to cover businesses’ pandemic revenue losses. RRF was established by the American Rescue Plan in March, and the Small Business Administration (SBA) released initial guidance on April 17.

Although $28.6 billion is a significant allocation, it falls well short of total restaurant revenue shortfalls over the pandemic, estimated by Congress at $120 billion (the original ask from House Democrats in the HEROES Act last September). Given expected demand, the funds will likely run out before all eligible applications are processed. Congress would then need to determine whether to expand the program to meet demand. For now, SBA is advising businesses to start applying from day one to increase their chances of payment and to demonstrate demand for a possible expansion.

The basic details of the program are as follows:

Eligibility: Funds are available to a wide array of privately owned food-related businesses, including restaurants, bars, caterers, food trucks and carts, brewpubs, and (if onsite sales make up at least 33% of gross revenues) bakeries, breweries, wineries, distilleries, tasting rooms, and inns. Businesses cannot have permanently closed, filed for bankruptcy, or operate more than 20 locations. Noncitizens are eligible as long as they have legal status and an individual taxpayer number (ITIN).

Funding Limits: Businesses may seek an amount equal to the difference between their 2019 gross revenue and their 2020 gross revenue, minus any Paycheck Protection Program (PPP) or other federal, state, or local pandemic aid. Awards are capped at $5 million per physical location and $10 million per business entity. Businesses will need to provide tax and/or bank information to document gross receipts.

Eligible Uses: Funds may be used for payroll, rent, utilities, property taxes, debt service (including principal payments and credit card debt), maintenance expenses, construction of outdoor seating, supplies, and other business operating expenses. Recipients are not required to repay the funding as long as funds are used for eligible uses incurred between February 15, 2020, and March 11, 2023.

Timeline: SBA is presently running a pilot to test the application process. A sample application form is now available here to allow applicants to prepare materials. SBA expects to begin accepting applications, including online, in early May.

SBA’s approach to RRF responds to lessons learned from the PPP’s first round, when banks prioritized their customers and larger businesses to the detriment of small, independent businesses in disadvantaged communities. To increase the likelihood of RRF funds going to businesses that need it most:

Within 21 days of program launch, the SBA will prioritize applications from businesses owned by women, veterans, and socially and economically disadvantaged individuals.¹

The fund sets aside funds for microbusinesses: $4 billion for businesses with revenues of $501,000 to $1.5 million annually; $5 billion for businesses earning not more than $500,000 per year; and $500 million for businesses making under $50,000.

For businesses lacking digital access or literacy, phone applications will be available.

SBA’s stated goal with the RRF rollout is to provide “as much relief to as many businesses as possible in a short amount of time.” Local economic development stakeholders, such as local government agencies, chambers of commerce, downtown associations, Business Improvement Districts (BIDs), community-based organizations, and others, can play an important role in working with their communities to make sure that the business owners in the greatest need of these funds are aware of the program, begin preparing materials, and are able to apply as soon as possible.

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1. According to SBA regulations, socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities. Individuals who are members of the following groups are presumed to be socially disadvantaged: Black Americans; Hispanic Americans; Native Americans (including Alaska Natives and Native Hawaiians); Asian Pacific Americans; or Subcontinent Asian Americans. Economically disadvantaged individuals are those socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged.↩