Accountants Help Restaurants Apply For New SBA Grants
The Small Business Administration will begin accepting applications Monday for a new program to help hard-hit restaurants reopen during the pandemic, and some businesses are preparing their customers to apply.
The SBA plans to open the application window for the Restaurant Revitalization Fund at noon EDT on Monday. Program registration open Friday morning. The $ 28.6 billion fund is part of the American Rescue Plan Act that President Biden enacted in March. It provides direct assistance to hard-hit restaurants and other food establishments that have suffered economic distress and losses from the COVID-19 pandemic. The program will provide restaurants with funding equal to their lost revenue from the pandemic of up to $ 10 million per business, but no more than $ 5 million per physical location. Funds must be used for eligible expenses by March 11, 2023.
The initial 21-day period is supposed to focus on providing grants to women-owned businesses, veterans, and socially and economically disadvantaged businesses. But as with other programs related to the SBA pandemic such as the Paycheck Protection Program, Economic Injury Disaster Loans, and Grants to Closed Site Operators, there will likely be missteps. and surprises that accounting firms and their clients will encounter.
“The biggest surprise is that there was supposed to be a grace period or a prioritization period, mainly for over 50% of businesses owned by women, minorities or veterans,” said Lynn Mucenski-Keck, partner of the Bonadio group who works. with restaurant customers. “Most people thought there would be a bit of time to wait until that 21 day period was over and then apply. But the SBA came out and said no, anyone who thinks they are eligible should apply from Monday. They will only review applicants who qualify for priority within the first 21 days, but essentially it will be a first-in, first-out grant. If your request arrives earlier, you will be the first to be reviewed after the 21-day period ends. “
The sudden change was unexpected. “This has caused panic among our customers,” said Mucenski-Keck.
The program does not apply only to restaurants – the definition of eligible entities eligible for grants also includes food stands, food trucks, food carts, caterers, lounges, inns, taverns, restaurants. bars, lounges, brasseries, tasting rooms, taprooms and more.
“The biggest issue we’ve heard today is with our hotel and hospitality customers,” Mucenski-Keck said. “In the SBA guidelines, they clearly say that if you can prove that 33% of your gross receipts are related to meals and beverages, you qualify for the RRF. But then he goes even deeper into the SBA FAQs and says that hotels are not considered hostels. A lot of our hotels sit there and don’t really understand it because legally, from their point of view, it’s just marketing as to whether they’re called a hotel or a hostel. They are quite frustrated.
The general FRR grant amount is equal to 2020 gross income minus 2019 gross income minus adjustments for first and second draw Paychex protection program loans received. There are significant differences in when the FRR grants should be used, the eligibility and the actual grant amount compared to PPP funding. Eligible entities may be pleasantly surprised by looking at the relative flexibility of grant restrictions. A big advantage for companies receiving the grant is the fact that it will not be considered taxable for federal income tax purposes. Instead, the expenses incurred will generally be allowed as deductions.
“There was a question, if I own more than one restaurant, how can I apply for the grant? Does every restaurant apply for a grant or is it based on something else? The SBA provided guidelines that basically said it was based on how you file your tax return, ”Mucenski-Keck said. “This sometimes puts some people at a better advantage than others, as they are allowed to view each of their restaurants separately, as long as they are under a separate, non-aggregated EIN.”
The SBA may need to correct some of the guidelines that are issued to restaurants regarding the program. “I think there is a potential error because the SBA right now is basing it on your tax return, and we’ve had a handful of clients who file tax years,” Mucenski-Keck said. “The way this year falls, their bad year was actually reported in their 2019 tax return versus 2020. They are kicked out based on how the guidelines currently exist, so fiscal year taxpayers who are restaurants are not very happy at the moment. “
Customers may be confused on how to balance and apply for the various SBA programs such as PPP First and Second Draw Loans, Grants to Closed Site Operators, the New RRF, as well as the Retention Credit for SBAs. IRS employees.
“We’re in New York State and they’re still on full or partial shutdown now because they’re not allowed to have 100% capacity,” Mucenski-Keck said. “There are all kinds of questions. “Do I have to cancel the ERC when calculating my Restaurant Revitalization Fund grant?” I said no, no. All you have to do is cancel your first and second draw. We’ve heard, surprisingly enough, a number of questions from clients who have applied for the Shuttered Venue, and now they think they can apply for RRF and are having a hard time figuring out which one to apply because that’s the either. It surprised us. We didn’t think there would be a mix. We thought it would be clearer which one would choose our clients. “
The RRF program comes with some additional flexibility compared to some of the previous programs. “With the RRF program, they will allow you to spend it until March 11, 2023,” Mucenski-Keck said. “In 2021, you can use your PPP funds. In 2022 and part of 2023, you can use your FRR or your grant. It’s not just for, like what we’ve seen with PPP, for rent, payroll, and utilities, but we also see it including upkeep of floors, furniture, fixtures, construction on the outdoor seating and food and drink expenses, which are obviously quite significant. to restaurants. It is much wider. The fact that you can spend it for a longer period of time, and you can spend it on a longer list of items above and beyond PPP, should get them excited. “