SBA to provide $ 28.6 billion in subsidies for restaurants and bars | McCarter and English, LLP
The $ 1.9 trillion stimulus package, known as the American Rescue Package, passed on March 11, 2021, established a $ 28.6 billion restaurant revitalization fund. dollars (“restoration fund”) for restaurants and other food establishments. Section 5003 of the rescue kit directs the Small Business Administration (“SBA”) to provide tax-free federal grants (“grants”) to eligible entities.
Who is eligible for a grant?
An “eligible entity” is a
- Food stand, food truck or food cart;
- Lounge, inn, tavern, lounge bar or brasserie, tasting room, taproom; or
- Any establishment or registered establishment of a producer of alcoholic beverages where the public can taste, sample or purchase products, or any other similar place of business where the public or customers meet for the primary purpose of being served as food and drink (collectively, “Eating establishments”).
Catering establishments are eligible for a catering fund if they have suffered a “pandemic-related loss of income” for the period beginning February 15, 2020 and ending December 31, 2021, or on a date set by the SBA , which cannot be after March. 11, 2023 (“Period covered”).
A “pandemic revenue loss” is the excess of gross revenue for the 2019 calendar over gross revenue for the 2020 calendar; but if
- a catering establishment has not been in operation for the entire year 2019, then the loss of revenue related to the pandemic is either (a) the difference between (i) the product of the average monthly gross revenue of the eligible entity in 2019 multiplied by 12 months and (ii) the product of the average monthly gross receipts of the eligible entity in 2020 multiplied by 12 months or (b) the amount based on a formula determined by the SBA.
- a food service establishment open during the period beginning January 1, 2020 and ending March 10, 2021, then the loss of revenue from the pandemic is either (a) the amount of its “salary costs” (which has the same meaning as defined in the CARES Act for Paycheck Protection Program (“PPP”) loans incurred less gross receipts received or (b) the amount based on a formula determined by the SBA.
- a catering establishment which is not yet in operation on the date of its subsidy application but which has incurred expenditure for which the proceeds of the subsidy can be used (“eligible expenditure”), then the loss of income linked to the pandemic is either (a) incurred Eligible Expenses or (b) the amount based on a formula determined by the ASB.
A catering establishment is excluded from the status of eligible entity and cannot claim a subsidy if it
- as of March 13, 2020, owned or operated (with its affiliate) more than 20 locations, whether those locations do business under the same name or under multiple names. “Affiliated enterprise” means an enterprise in which the catering establishment has capital or a right to profit distributions of 50% or more or has the contractual right to control the enterprise. We expect the SBA to issue its own guidance as to the meaning of an “affiliated company” since the definition in Section 5003 of the Rescue Package can be interpreted to exclude an entity controlling a food service establishment and controlled entities. common with the catering establishment.
- has an application in progress or has received a subsidy under the operator subsidy program established by the law on economic assistance to small businesses, non-profit organizations and sites in difficulty (“location subsidy”).
- is a publicly traded company or a state or local government company.
How is the grant amount calculated?
The amount of the grant will be the amount of the loss of income from the pandemic reduced by the amount of any PPP loan. In addition, the aggregate grant amount to an eligible entity and its affiliated businesses cannot exceed $ 5 million per location and $ 10 million in total.
What can the grant be used for?
The grant can be used for the following eligible expenses:
- Salary costs (but not including salaries used for employee retention credit);
- Principal or interest on mortgage bonds (which must not include early repayment of principal on a mortgage bond);
- Rent payments, including rent under a rental agreement (which will not include any prepayment of rent);
- Maintenance costs, including construction to accommodate exterior seating and walls, floors, patio surfaces, furniture, fixtures and equipment;
- Supplies, including personal protective equipment and cleaning materials;
- Food and beverage costs that fall within the scope of normal business practice of the eligible entity prior to the period covered;
- Supplier costs covered (which has the same meaning as defined in the CARES law for PPP loans);
- Operational expenses;
- Sick leave with pay; and
- Any other expenses that the ASB deems essential to maintain operations during the period covered.
Restaurant Fund Loan Priorities and Limits
During the initial 21-day period during which grants are awarded, the SBA is required to prioritize grants to small businesses owned by women or veterans and to socially and economically disadvantaged small businesses. In addition, until May 10, 2021, $ 5 billion from the Restoration Fund will be reserved for companies whose gross revenues in 2019 are less than or equal to $ 500,000.
Certificate of good faith required
An eligible entity applying for a grant is required to certify in good faith 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; and
- The eligible entity has not requested or received a grant under the site grant.
Grant to be repaid
The beneficiary will be required to return the grant funds if:
- The beneficiary does not use all grant funds before the last day of the period covered;
- The recipient goes bankrupt before spending all grant funds; or
- The beneficiary’s loss of income related to the pandemic is estimated in his grant application and the estimate overestimates the losses.
Although the ASB has not released details regarding the publication date of the grant application at the time of this publication, the National Association of Restaurateurs shared his planned schedule, namely:
- April 2021 – SBA publishes grant applications, rules and advice. As previously indicated, we anticipate that the ASB will provide guidance as to whether “affiliated enterprise” includes an entity controlling a catering establishment and entities under common control with the catering establishment.
- May June 2021 – During the initial 21-day period, the SBA will begin providing grants to small businesses owned by women or veterans and to socially and economically disadvantaged small businesses.
- May June 2021 – Grant applications will be accepted from all eligible entities.
McCarter & English, LLP, will continue to provide updates regarding the rescue program, restaurant funds and related grants