Earlier this week, the SBA announced that the portal for the RRF will go live on Friday, April 30, 2021, beginning at 9 am EDT so that qualified applicants may register for an account.  Further, the SBA announced that the portal would officially begin accepting applications to receive funds from the program on Monday, May 3, 2021 at 12 pm EDT.  Applicants will need an account in the system in order to apply for funds.

The SBA is encouraging applicants to familiarize themselves with the application process by registering for an account in advance, ensuring a smooth and efficient experience.  Applicants should also review the official SBA guidance, including the program guide, frequently asked questions, and the sample application.

One notable change is that the SBA has signaled that the portal will remain open to eligible applicants only until the Fund has been exhausted. Previously, there had been speculation about options to increase the funds if the applicants flooded the SBA with requests, as happened last year during the initial round of the Paycheck Protection Program.  This week’s announcements seems to imply that once the RRF funds have been exhausted, the application portal will shut down.

What does this mean for restaurant owners who have suffered huge losses during the pandemic?  For starters, applicants would be wise to review the application requirements in advance and be prepared with all the information required to complete the application once the portal begins accepting applications on Monday, May 3.

Although the SBA has set aside the first 21 days of the application period as a priority window to benefit businesses owned by women, veterans, and socially and economically disadvantaged individuals, it is recommended that any qualified applicant register and apply early.  Expectations are high that the SBA will be flooded with applicants and the funds will quickly be exhausted.

The post Update On SBA’s $28.6 Billion Restaurant Revitalization Fund: Launch Date For Online Application Portal Announced appeared first on McCarthy Lebit - A Cleveland/Ohio Law Firm.

Application

Ahead of the program launch and over the next two weeks, the SBA will conduct a 7-day pilot period where the SBA will address any technical issues ahead of the launch.  Applicants will be able to submit applications as soon as the program opens, but the SBA will prioritize applications from businesses owned by women, veterans, and economically disadvantaged individuals for the first 21 days.  After the first 21 days, the SBA will accept applications from all eligible participants and process applications in the order in which they are approved by the SBA. The SBA has not announced an official launch date for the program.

Applicants will be able to apply through SBA-recognized Point of Sale Restaurant Partners or directly via the SBA’s forthcoming online application portal.  While the SBA is not currently accepting applications, a sample application can be found on the SBA’s website.  Applicants must complete the application (SBA Form 3172) and provide the following additional documentation with their application:

1. IRS Form 4506-T (completion of this form digitally on the SBA platform will satisfy this requirement); and
2. Gross receipts documentation demonstrating gross receipts and, if applicable, eligible expenses. Gross receipts documentation includes business tax returns, IRS Form 1040 Schedule C, IRS Form 1040 Schedule F, a partnership’s IRS Form 1065 (including K-1s), bank statements, externally or internally prepared financial statements, and point of sale reports (including IRS Form 1099-K).
3. Brewpub, tasting room, taproom, brewery, winery, distillery, or bakery applicants must provide confirming documentation that onsite sales to the public comprise at least 33% of gross receipts.
4. Inn applicants must provide confirming documentation that onsite sales of food and beverage to the public comprise at least 33% of gross receipts.

Eligible Entities

Eligibility for the program is confined to those entities that have experienced pandemic-related revenue loss.  Eligible entities include: (1) restaurants; (2) food stands, food trucks, food carts; (3) caterers; (4) bars, saloons, lounges, taverns; (5) snack and nonalcoholic beverage bars; (6) bakeries; (7) brewpubs, tasting rooms, taprooms; (8) breweries and/or microbreweries; (9) wineries and distilleries; (10) inns; and (11) licensed facilities or premises of a beverage alcohol producer where the public may taste, sample, or purchase products.

Funding Calculations

The SBA may approve up to $5 million per location, not to exceed a total of $10 million per applicant and any affiliated businesses. The minimum award is $1,000.  The SBA has provided three separate calculations to determine an applicant’s funding amount:

CALCULATION 1:

For applicants in operation prior to or on January 1, 2019:

(2019 gross receipts) – (2020 gross receipts) – (PPP loan amounts)

CALCULATION 2:

For applicants whose business operations began partially through 2019:

[(Average 2019 monthly gross receipts) X (12 month)] – [(2020 gross receipts) – (PPP loan amounts)]

CALCULATION 3:

For applicants that began operations on or between January 1, 2020 and March 10, 2021 and have not yet opened but have incurred eligible expenses:

[(Amount spent on eligible expenses between February 15, 2020 and March 11, 2021) – (2020 gross receipts) – (2021 gross receipts through March 11, 2021) – (PPP loan amounts)

Entities who began operations partially through 2019 may elect to use either Calculation 2 or Calculation 3.  Further, for purposes of the program, gross receipts do not include:

1. Amounts received from Paycheck Protection Program (PPP) loans;
2. Amounts received from Economic Injury Disaster Loans (EIDL);
3. Advances on EIDL;
4. State and local grants; or
5. SBA Section 1112 payments.

Eligible Use of Funds

Recipients are not required to repay the funding, as long as funds are spent on eligible uses by no later than March 11, 2023.  RRF funds may be used for specific expenses including:

1. Business payroll costs (including sick leave);
2. Payments on any business mortgage obligation;
3. Business rent payments (not including prepayments of rent);
4. Business debt service (both principal and interest, but not including any prepayment of principal or interest);
5. Business utility payments;
6. Business maintenance expenses;
7. Construction of outdoor seating;
8. Business supplies;
9. Business food and beverage expenses;
10. Covered supplier costs;
11. Business operating expenses.

Conclusion

The SBA will announce in the near future a start date to start accepting applications once the website they will be using has been tested.  Until then, prospective applicants are encouraged to visit the SBA website for additional information and begin assembling all necessary data and documentation requirements for the application.

The post SBA Announces Official Restaurant Revitalization Fund Application and Guidelines appeared first on McCarthy Lebit - A Cleveland/Ohio Law Firm.

As part of its efforts to finalize and unveil program, the SBA has released a draft application form, together with a letter to the Office of Management and Budget asking for emergency review of the materials.  While the application is merely in draft form, it is believed that the finalized application will largely reflect the information included in the current document.  Thus, the draft application helps shed some light on the specifics of the program and what information business owners should have available when applying for the RRF grants.

For instance, the draft application shows that the SBA plans to maximize the covered period under which businesses can spend grant proceeds.  The ARPA identifies a covered period of February 15, 2020 to December 31, 2021, however it also gives the SBA the ability to expand the covered period to no later than two years after the legislation was passed.  The current draft application indicates that the SBA intends to maximize the covered period so that businesses can spend grant proceeds through March 11, 2023.

Further, the draft application provides additional details on the group of applicants given priority under the program.  During the first 21 days of the program, the ARPA gives priority to applications for businesses owned by women, veterans, and/or socially and economically disadvantaged individuals.  Pursuant to the draft application, the applicant must be at least 51% owned and controlled by individuals who are women, veterans, and/or socially and economically disadvantaged individuals in order to receive priority treatment.

Additionally, businesses must not be permanently closed to qualify for the program.  Businesses that have declared bankruptcy but have an approved reorganization plan are still eligible to receive RRF grants.  However, if a business has declared bankruptcy but does not have a plan for reorganization, or has filed for a liquidation, the business will not be eligible for the program.

The draft application also details the documentation required to be submitted when applying for a RRF grant.  All applications must include:

1. a completed application form;
2. a completed IRS Form 4506-T; and
3. documentation demonstrating gross receipts, such as business tax returns, IRS Forms 1040 Schedule C and Schedule F, bank statements, externally or internally prepared financial statements, and point of sale reports. Paycheck Protection Program (PPP) proceeds are removed from gross income for purposes of calculating gross receipts in the application.

Additionally, applicants from businesses defined as brewpubs, tasting rooms, taprooms, breweries, wineries, distilleries, bakeries, and inns must supply additional documentation evidencing onsite sales to the public comprise at least 33% of gross receipts.  In total, the application is expected to take about 45 minutes to complete.

Further guidance by the SBA is expected as the program nears its launch date Though  the application is not “live,” applicants would do well to gather the required information in advance so they have everything ready when the program does go live, especially since the $28.6 billion ear-marked for the program is not expected to last long. In the meantime, the draft application is available for review and can be found at https://omb.report/icr/202104-3245-001.

The post Restaurant Revitalization Fund Draft Application Released by the SBA appeared first on McCarthy Lebit - A Cleveland/Ohio Law Firm.