The ARP contemplates giving the head of the Small Business Administration (SBA) $25 billion for purposes of “revitalizing” the restaurant industry. That’s a lot of hamburgers, or sushi, depending on your preferences.
The provision is based off of the bipartisan, bicameral Real Economic Support That Acknowledges Unique Restaurant Assistance Needed to Survive Act (yes – the RESTAURANTS Act) introduced last Congress and this one by Sens. Sinema (D-AZ) and Wicker (R-MS) and Reps. Blumenauer (D-OR) and Fitzpatrick (R-PA).
The good news is that access to this fund is closely defined after some loans given under the Paycheck Protection Program (PPP) found their way to major corporations. For instance, any entity that owns or operates more than 20 locations, even if the locations are operated under different names, is ineligible for this new program. Likewise, if you run a publicly-traded company you’re ineligible.
Because words matter, so too do legislative definitions. Here is the list of eligible entities (as long as they don’t meet either of the ineligible thresholds listed above.)
“…a restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, licensed facility or premise of a beverage alcohol producer where the public may taste, sample, or purchase products, or other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink…”
Additionally, the language specifically mentions that your business may be located in an airport terminal or be Tribally-owned. We wouldn’t think those two things need to be specified if the entities meet the rest of the descriptive language, but sometimes legislation is written in a “belt and suspenders” kind of way. So, a food stand (or any of the rest of the establishments listed) in an airport or that is Tribally-owned is definitely covered.
Grants are at least partially based on a formula to determine the difference in gross receipts between 2019 and 2020 with some adjustment for previous PPP assistance factored in. So, some math will be required by food purveyors to verify revenue losses. Breakout your calculator and last year’s tax forms.
Of the $25 billion ARP would give to the SBA Administrator, $5 billion must be available only to restaurants with gross receipts of less that $500,000 in 2019. The other $20 billion is available based on “demand and the relative local costs in the markets in which eligible entities operate.” No entity may receive more than $10 million and no more than $5 million per physical location of an eligible restaurant. Also, the restaurant owner must certify they have not applied for nor received a grant under Section 324 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Title III of Division N of Public Law 116-260).
The bill language makes clear that the grants “shall” (no wiggle room there) “be equal to the pandemic-related revenue loss” of the food purveyor. That’s a good rule of thumb, but verifying those losses will be a paperwork drill for SBA to oversee.
What can the restaurant or other food entity use the grant money to cover?
- Mortgage principal and interest (but not prepayment of the mortgage)
- Maintenance, including construction to accommodate outdoor seating
- Supplies including protective equipment and cleaning supplies
- Food and beverages of the type normally sold by the business
- Covered supplier costs
- Operational expenses
- Paid sick leave
- Other costs determined by the Administrator to be essential
A brand new $25 billion fund is sure to have some glitches as the SBA rolls out the application and grantmaking process. Abuses will be uncovered because, well, where there’s that much money sloshing around, scammers will show up to take advantage. But restaurants, particularly the small business entities, are a vital part of the economy. So, we’ll borrow President Reagan’s saying which he borrowed from a Russian proverb, “Trust but verify.”
Let’s help the restaurants while, at the same time, keeping a close eye on potential abuses.