Restaurants occupy a special place in the fabric of our communities, and the COVID-19 economic catastrophe has left restaurants and bars on the brink. While they were generally classified as “essential businesses,” many restaurants are still struggling and scraping by with a carry-out focus or expensive new outdoor dining structures.
It’s been rough going for the restaurant industry. A recent study from the food industry research firm Datassential found that more than 10% of all US restaurants have closed permanently since the onset of the pandemic, and that represents nearly 80,000 restaurants we’ve lost. When even McDonald’s and Starbucks are closing locations, you know things are bad.
That’s why the US Small Business Administration (SBA) is offering a new $28.6 billion lifeline known as the Restaurant Revitalization Fund. Created under President Biden’s American Rescue Plan, this new restaurant relief program provides grant money for restaurants to keep staff on board and help cover everyday expenses.
“Recognizing the great urgency to help restaurants keep their doors open—and with a clear mandate from Congress—the SBA worked at a breakneck speed and is excited to launch this program,” SBA associate administrator Patrick Kelley said in a statement. “From day one, we engaged with diverse stakeholders in the food industry community to make sure we built and delivered the program equitably, quickly, and efficiently.”
In one sense, the program has been a remarkable success right out of the gate. Just 10 days into the program, the SBA announced that 21,000 restaurants had received $2.7 billion in relief funds. This rollout is far smoother than the early days of Paycheck Protection Program (PPP) loan approvals.
But the demand is so overwhelming that more than double the allotted $28.6 billion has already been requested. Many applicants might be disappointed by a smaller relief payment than they’d requested—or even no relief at all. The day after the SBA’s announcement, the Los Angeles Times reported that the agency had been swamped with more than a quarter of a million applications requesting a total of $65 billion. Meanwhile, many restaurant owners are venting frustration at how the program is structured, and some have even filed a lawsuit alleging that white men are being “pushed to the back of the line.”
Let’s make sense of what the Restaurant Revitalization Fund can do for your small business and how to apply if your business is eligible.
These relief funds are going to more than just traditional sit-down restaurants. The grants are also available to bars, bakeries, breweries, caterers, food trucks, tasting rooms, and wineries “that have experienced economic distress and significant operational losses due to the COVID-19 pandemic.”
Businesses are eligible to be reimbursed for whatever revenue they can prove they lost during the pandemic. Individual establishments are eligible for up to $5 million, establishments with more than one location are eligible for up to $10 million.
Any funds awarded must be used on payroll, payment to suppliers, or bills like mortgage, rent, or utilities payments. Your business can also use the money on COVID-specific costs, like building or maintaining outdoor seating areas or safety equipment and ventilation upgrades.
You have to spend the money by March 11, 2023, and you don’t have to pay any of it back. But all of it must be spent on the above-named operational costs. That’s not a request—it’s a requirement.
There are safeguards in the program that ensure small businesses don’t get shut out. About a third of the funds, or $9.5 billion, is set aside for food businesses that made less than $500,000 in gross receipt revenue during 2019. And a full $500 million is set aside for businesses that made less than $50,000 in 2019.
It’s true that far more Restaurant Revitalization Fund money has been requested than exists in the overall pot. But only the first few billion dollars of the nearly $30 billion have been awarded, and the SBA is distributing the funds in a slow and deliberate fashion. Your small business may still be eligible for some of this relief money.
For the first 3 weeks of the program, applications are only being accepted for food establishments that are at least 51% owned by women, veterans, or people who the SBA defines as “socially and economically disadvantaged.” Then effective May 24, 2021, the application process is open to all restaurants.
With regards to the socially and economically disadvantaged language, the SBA explains they consider socially disadvantaged to mean “those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.” They define economically disadvantaged as “socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities.”
The SBA is metering out the funds slowly in hopes of distributing them as fairly as possible. But the program’s prioritization of minority-owned businesses for the first 3 weeks has not been universally popular. CBS News reports on a lawsuit challenging that process, claiming it “puts white male applicants at significant risk that, by the time their applications are processed, the money will be gone.”
However, more money could be coming to the Restaurant Revitalization Fund.
Lawmakers are already in initial discussions about adding more money to the fund, and there is bipartisan support for the idea on both sides of the aisle.
“There is truly a national appetite to do this, and there’s no part of the country where this support is not badly needed and strongly supported,” Rep. Earl Blumenauer (D-OR) said in a statement to the Los Angeles Times.
The game is not over on Restaurant Revitalization Fund grants, and food business owners should consider applying as soon as possible.
There is still time left to apply, as the SBA will continue taking applications until all of the funds have been distributed. Only a small portion of the overall funds have been awarded, and more money could be on the way.
Your small business will first have to register for an SBA account at restaurants.sba.gov. The application is only available if you have a registered account. But the SBA does provide a sample Restaurant Revitalization Fund application to help you prepare documentation if your small business does not yet have an active account.
Your business will probably not get $5 million or $10 million. Trade publication Restaurant Business reports that the average Restaurant Revitalization Fund grant is $125,000.
But applications do remain open. And the Restaurant Revitalization Fund is just one form of small business relief, as there are many other types of small business loans available to your food establishment.