The American Rescue Plan Act of 2021 (ARPA) provides billions in new funding targeting the hardest-hit small businesses. It also established a new SBA grant program, the Restaurant Revitalization Fund, to help restaurants, bars, and other related businesses impacted by the pandemic. New funding opportunities will be available in the coming weeks. In this post, we provide a brief overview of recent developments to SBA COVID-19 Relief Programs including changes to:
- Paycheck Protection Program
- Economic Injury Disaster Loan and Grant Program
- Shuttered Venue Operators Grant Program
- Restaurant Revitalization Fund Grant Program
Paycheck Protection Program
The Paycheck Protection Program was first established under the CARES Act in March of 2020 and provides forgivable loans to small businesses affected by the pandemic. The loan is eligible for full forgiveness if 60% of the loan is used on payroll costs and the other 40% is used on authorized expenses during the cover period. Certain PPP loan borrowers can apply for a second PPP loan (“second draw PPP”).
The ARPA provides an additional $7.25 billion in funding for the PPP. It also expanded eligibility to additional not-for-profit entities including all 501(c) organizations that employ no more than 300 employees per physical location. These non-profit entities are subject to limitations based on lobbying activities, including:
- Receive no more than 15% of its receipts from lobbying activities
- Lobbying activities must not comprise more than 15% of total activities
- Lobbying activity costs cannot exceed $1 million during the most recent tax year ended prior to February 15, 2020
PPP Deadline Extended
On Tuesday, March 31st President Biden signed the PPP Extension Act of 2021 into law. This legislation extends the deadline to apply for Paycheck Protection Program loan from March 31st to May 31st. The law also extends the loan approval deadline until June 30, giving the Small Business Administration an additional 30 days from the application deadline date to process loans.
PPP Eligibility Expanded
In February 2021, SBA also made additional changes to target funding to the smallest businesses. Generally, small and low-income businesses that have not received the needed relief a forgivable PPP loan provides. To advance these goals, SBA has:
Eliminated Restrictions. The administration has eliminated restrictions that prohibited certain small business owners from applying for PPP loans. The SBA will ensure access to PPP loans for small business owners that have:
- prior non-fraud felony convictions
- delinquent federal student loans
- Individual Taxpayer Identification Number (ITIN) that are lawful U.S. residents
Revised Loan Calculation. Allowed sole proprietors, independent contractors, and self-employed individuals to receive more financial support by revising the PPP’s funding formula for these applicants. The new rules allow schedule C filers to use gross income instead of net profit to calculate the maximum PPP loan amount. If you have already received a PPP loan before March 3rd, you can’t amend the loan. However, you can apply for a second PPP loan if you have had a 25% decline in revenue in any quarter of 2020 as compared to the same quarter in 2019.
Economic Injury Disaster Loan
The SBA Economic Injury Disaster Loans (EIDL) loans are available to small businesses and non-profit organizations that suffer economic injury as a direct result of a federally declared disaster, such as the pandemic. The Consolidated Appropriations Act of 2021 (The Act) extended the Economic Injury Disaster Program until December 31st, 2021, or until funds run out.
- EIDLs are working capital loans that can be used to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the disaster not occurred.
- The interest rates can be as low as 3.75% for small businesses, and 2.75% for non-profits.
- Long-term repayments are offered in order to keep payments affordable, up to a maximum of 30 years.
- Small businesses; small agricultural cooperatives, most private non-profit organizations, tribal businesses; cooperative; sole proprietors, and independent contractors are eligible.
Increased Loan Limits for EIDL
On March 24th, the SBA announced that starting April 6th it will increase the maximum loan limit for EIDL loans:
- loan limit increases from 6-months of economic injury with a maximum loan amount of $150,000 to up to 24-months of economic injury with a maximum loan amount of $500,000
- Any loan applications in process when the new limits go into effect will automatically be considered for the new maximum limits.
- Existing borrowers will be eligible for an increase in their loan amount
Targeted Economic Injury Disaster Loan Advances
The ARPA appropriates an additional $15 billion to the Targeted Economic Injury Disaster Loan Advances:
- $10 billion of the funds will be used for payments to individuals that did not receive the full $10,000 EIDL Advance.
- $5 billion of the funds will be used to provide $5,000 grants to business that suffered an economic loss of more than 50% and have 10 or fewer employees
Shuttered Venue Operators Grant
The Shuttered Venue Operations (SVO) Grant program was established by the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venue Act which was signed into law on December 27, 2020, as part of the Consolidated Appropriations Act of 2021 (CAA). This legislation authorized $15 billion in grants to shuttered venue operators.
The amount awarded to an eligible business will depend on when the business was in operation. If your business was in operation on January 1, 2019, then you can get a grant equal to 45% of the gross earned revenue of the entity during 2019. If your business was in operation after January 1, 2019, then the grant will be equal to 6x the average monthly gross earned revenue for each full month the business was operational in 2019.
The ARPA provides an additional $1.25 billion in funds to the Shuttered Venue Operators Grant program. The ARPA also allows eligible entities that received a PPP loan to apply for an SVOG grant. The PPP loan amount will be deducted from the awarded grant.
The SBA announced that the SVOG Application Portal opens on April 8th. Visit the SBA SVOG Application Portal. It has released the following documents and videos with additional information about the SVOG program:
- Shuttered Venue Operators Grant Eligibility Requirements
- Shuttered Venue Operators Grant Preliminary Application Checklist
- Cross-program eligibility on SBA COVID-19 relief options
- FAQ Regarding Shuttered Venue Operators Grant (SVOG)
- Shuttered Venue Operators Grant – 4506T Form
- VIDEO: Shuttered Venue Operators Grant: Instructions for IRS Form 4506-T
- VIDEO: SVOG Application Informational Webinar
Restaurant Revitalization Fund (RRF)
The American Rescue Plan Act of 2021 (ARPA) appropriates $28.6 billion to the new Restaurant Revitalization Fund (RRF) to assist restaurants, bars, and related businesses that have been impacted by the pandemic.
- $23.6 billion will be awarded in an equitable manner to different-sized businesses based on annual gross receipts.
- $5 billion is available to businesses with gross receipts of $500,000 or less during 2019
The RRF will provide tax-free federal grants equal to the amount of its pandemic revenue loss. The RRF grants will be administered by the Small Business Administration (SBA). It will prioritize the grant applications of women-owned, minority-owned, and veteran-owned businesses with less than $500,000 in 2020 sales for the first 21-days of the program.
On March 30th, the SBA confirmed via twitter that the RRF grant program applicants will not be required to obtain a Dun and Bradstreet Number (DUNS number) or register with the federal System for Award Management (SAM.gov).
Who is eligible for the RRF grant?
Small businesses with 20 or fewer locations that can demonstrate that the primary purpose of their business is to serve food or drink and have lost revenue in 2020. Eligible entities are required to certify that uncertainty of current economic condition makes the request for the grant necessary to support their business.
Eligible entities include: “Restaurants, food stands, food trucks, food carts, 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 customers frequent for the primary purpose of being served food or drink”.
The following entities are excluded: (1) Applicants of the Shuttered Venue Operators Grant Program, (2) Publicly Traded Companies, and, (3) Business operated by State and Local Government.
How is the amount of the RRF calculated?
The amount of the grant awarded will be provided based on pandemic-related revenue loss. The calculated pandemic revenue loss will be reduced by amounts received from a PPP loan.
- If the business opened in 2018 or earlier the pandemic revenue loss is equal to the 2020 gross receipts subtracted by 2019 gross receipts.
- If the business opened in 2019, the total is the difference between the annualized average monthly gross receipts in 2020 and the average monthly receipts in 2019.
- If the business opened in 2020, it will receive a grant amount equal to the amount of eligible expenses subtracted by it gross receipts.
The maximum grant amount awarded is capped at $5 million per physical location of the business and at $10 million for affiliated businesses.
How can the RRF grant funds be used?
The RRF grant funds can be used on qualified expenses incurred during the cover period from February 15, 2020 to December 31,2021. Any grant funds that are not used by the end of the cover period must be repaid to the Department of Treasure.
Eligible expenses include:
- Payroll cost (Eligible payroll costs cannot include any wages used to obtain the Employee Retention Credit)
- Payments of principal or interest on any mortgage (not including prepayments)
- Rent payments (not including pre-paid rent)
- maintenance including construction to accommodate outdoor seating
- Supplies, including protective equipment and cleaning materials
- Food and beverage expenses
- Covered supplier cost
- Operational expenses
- Paid sick leave
- and any other expenses that the SBA determines to be essential to maintaining operations.
An eligible business will be able to access an application to RRF grants via the SBA portal. The program doesn’t have an official opening date. Additional guidance from the SBA is expected in the coming weeks.