If you are one of those lucky people who have received money from the restaurant revitalization fund, then you are probably wondering –
- When and how can you strategically use the money to grow your business to grow your restaurant business?
- Pay the least amount of tax that is legally possible.
- And how to not return those funds.
In this article, I shall take you through a thorough lesson on restaurant revitalization funds and how it can be the most efficient option for you to grow your business.
What Is A Restaurant Revitalization Fund?
Back in May 2021, the RRF, or the Restaurant Revitalization Fund, was launched. It had $28.6 billion, which Congress allocated to offer funds to that sector of the economy that had to incur severe effects of the COVID-19 pandemic.
The supply of the fund, however, fell far short compared to the demand. While the administrator of the program, the U.S Small Business Administration gave over 100,000 grants, which totals $28.6 billion.
There were more than 280,000 applications for the restaurant revitalization fund, which was seeking funds of over $72 billion.
A Short History Of The Restaurant Revitalization Fund
On March 11, 2021, the ARPA, or the American Rescue Plan Act, became a law that established a number of relief programs.
Some of those acts include the Restaurant Revitalization Fund, which the ARPA offered $28.6 billion, which the SBA’s Office of Disaster Assistance administered and paid to the restaurants, pubs, bars, and other food and drink providers.
The eligible applicants could qualify to get a tax-free fed grant, which was the same as the amount of the loss they incurred during the pandemic. This was calculated by deducting 2020 gross receipts from the gross receipts of 2019.
The grant was lessened by any Paycheck Protection Program that the applicants of the loan were receiving. The maximum amount that was available for one single grant was $5 million per location physically, limited to $10 million for each entity and the affiliates, with the minimum rewards, which counted to $1,000 for each entity.
On 30th April, the application portal was accessible for registrations. The acceptance of the applications started on May 3rd and ended on May 24th.
The U.S Small Business Administration, which was looking after the RRF, received thousands of applications. Only within ten days, the SBA confirmed that they have received requests that will require twice the $28.6 billion that was initially sanctioned for the Restaurant Revitalization Fund.
During that time, the program was to offer a major portion of the fund to businesses that were owned by veterans, women, and socially and economically disadvantaged people. The American Rescue Plan Act made it mandatory for those businesses that submitted around 147,000 applications, which totaled $29 billion during the opening days of the program, to get priority reviews for the first 21 days of the program.
Eligibility Criteria For The Restaurant Revitalization Fund
Not every business owner can apply for the restaurant revitalization fund. Here are the important criteria, which only upon fulfilling a business owner apply for the RRF.
- Eligible entities for the restaurant revitalization fund were the ones that were not closed permanently and where the patrons or public assembled for food or drinks. These were:
- Food stands, food carts, food trucks,
- Snack and nonalcoholic beverage bars
- Brewpubs, tasting rooms, and taprooms
- Bars, saloons, lounges, and taverns
- Snack and nonalcoholic beverage bars
- Wineries and distilleries
- Breweries and/or microbreweries
- Licensed facility or premise of a producer of alcohol where individuals may sample, taste, or buy the products.
- Any other identical business in the patrons or the public may assemble for food or drinks.
What Are The Calculations Of The Grant Amount?
There are three main calculations to decide the funding amount, which depends on when the applicant starts the operations.
Calculation 1 for applicants who were in operation before or on January 1st, 2019:
2019 gross receipts – 2020 gross receipts – PPP loan amount, if any
Calculation 2 for those applicants that began operating after 1 January 2019:
(Average monthly gross receipts of 2019 X12) – gross receipts of 2020 – PPP loan amounts, if any.
Calculation 3 for the applicants who began operating between January 1st, 2020, to March 10th, 2023, and also the applicants who haven’t yet opened but had to incur eligible expenses:
Amount spent on all eligible expenses between 15th February 2020 and March 11th, 2021 – gross receipts of 2020 and 2021 – PPP loan amount, if any.
What Is The Cover Period For A Restaurant Revelation Fund?
Eligible expenses are those that the businesses incurred between February 15th, 2020, and March 11th, 2023. If the business permanently shuts down, the covered period will also come to an end when the business shuts down completely, or on 11th March 2023, whichever occurs before.
If the business does not spend all the funds granted to them, or if the business shuts in between the cover period, then they have to return the rest of the fund to the Treasury.
The entire process for reporting the funds usage is not what the SBA defines.
What Are Gross Receipts?
For the purpose of the restaurant revitalization fund, gross receipts are all the revenue accrued or received, like interest, sales of products or services, rents, dividends, fees, royalties, or commissions, and gets reduced by the allowances and returns.
However, it will not include:
Amounts that the business receives from the Paycheck Protection Program loans.
- Payments from SBA Section 1112.
- Economic Injury Disaster Loans, Target EDIL Advance, EDIL Advance, or any such grants that the business may have received through the CARE Act.
- Local and state business funds.
- Randolph-Sheppard Act Financial Relief and Restoration Payments Appropriation.
Frequently Asked Questions!! (FAQs)
Ans. These funds are used for specific expenses, which include costs for business payroll, any business mortgage obligation payment, business rent payment, etc.
Ans. As the name suggests, individuals who run businesses and serve people food and drinks are the recipients of the RRF. This includes restaurants, pubs, bars, etc.
Ans. There is no confirmed news about the replenishment of the restaurant revitalization fund. The recipients can now only keep their hopes in the hands of Congress.
When individuals receive a lump sum of money from the government, the natural urge for the owner-operators will be to spend the money, hoping that it is free of tax. As you have read in the article, the restaurant revelation fund is not for fixing a poor financial position.
It is necessary to continue to monitor the margins of the restaurant and make sure of operating profitability in case yet another disaster arises out of thin air.