The American Rescue Plan Act: What Restaurants Must Act On NOW | Newmeyer Dillion
The American Rescue Plan Act (“Act”) was passed by the Senate over the weekend and passed by the House today. President Biden is expected to sign the law on Friday, March 12e. The law has $ 1.9 trillion in relief funds, of which $ 28.6 billion is earmarked for the restaurant industry in the Restaurant Revitalization Fund (“Fund”). The Fund has divided the funds into two funding groups; $ 5 billion for restaurants with annual gross income less than $ 500,000 and $ 23.6 billion for restaurants with annual gross income greater than $ 500,000.
Differences from the Paycheque Protection Program (“PPP”)
This is a grant program with no loan documents or rebate requests. Instead, each catering entity can apply for and receive up to $ 10 million in grants under the law. The amount a restaurant receives is based on the sum of the restaurant’s gross revenue in 2019 minus the gross revenue in 2020 minus the PPP and EIDL amounts received. For example, Restaurant A achieved gross income of $ 7 million in 2019, achieved gross income of $ 3 million in 2020, and received $ 1 million in combined PPP and EIDL. ($ 7M – $ 3M – $ 3M = $ 3M) The restaurant will receive $ 3M in grant funds directly from the SBA (as long as funds are available).
The authorized use of funds is much broader than the authorized use under the PPP. In order to receive a discount from the PPP loan, the funds had to be used to withhold employees or similar expenses and capped at a certain dollar amount per employee. The Law does not have these same limits. Acceptable use of funds includes: salary costs, rent, utilities, maintenance (including construction of outdoor seating and related redesign), supplies, food and beverage expenses, and operational expenses .
This law only applies to restaurants, i.e. restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brasserie, tasting room, bar, licensed facility or establishment of an alcoholic beverage producer where the public can taste, taste or purchase products, or any other similar place of business in which the public or customers gather for the primary purpose of being served food or drink.
The catering entity should not be a publicly traded entity and it should not have more than 20 locations, including through its affiliates.
The Act has identified three eligible groups that will be given priority for the first 21 days of funding. The three eligible groups as defined by the Small Business Administration are; 1) women-owned small businesses, 2) veteran-owned small businesses, and 3) socially / economically disadvantaged small businesses.
Restaurant owners should consult their accountants to prepare their 2020 financial reports and compare these numbers with the 2019 financial reports to determine how much the restaurant may be eligible for. Unlike the PPP program, these funds are not loans, but grants distributed by the SBA. Applicants should apply directly through the SBA.