If you were one of the roughly one-third of applicants for the Restaurant Revitalization Fund (RRF) to have received funding, consider yourself lucky. The $28.6 billion appropriated by Congress in the American Rescue Plan Act to serve as much-needed relief for restaurants and bars barely scratched the surface of the roughly $88 billion that qualified for funding. As disclosed in a recently released list from the Small Business Administration (SBA), 100,004 foodservice businesses received grants through this first round of funding. Restaurant associations in various states across the country are pushing for a second round of funding and more relief efforts, as roughly 270,000 applications were turned away when the RRF was depleted. While we wait for further action from lawmakers, it’s important that restaurants and other eligible businesses that did receive funding through the RRF know how to maximize the spending of those dollars.
How Can the Funds Be Spent?
Funds can be used to cover certain expenses, incurred from Feb. 15, 2020, through March 11, 2023, such as payroll costs; occupancy costs like rent, mortgage obligations, and utility payments; maintenance costs; food and beverage expenditures; and other business expenses more fully described in the SBA Restaurant Revitalization Fund Program Guide. Recipients must report no later than Dec. 31, 2021, through the SBA application portal, how their award has been used against each eligible use category. As many restaurants are fully expending their funds this year, when they report in the portal in 2021, they will be asked to certify that the proceeds have been used on eligible expenses. If recipients do not fully expend their award funds prior to Dec. 31, 2021, they will be required to complete this report on an annual basis. Determining how you expend your award should be carefully considered.
Should I Just Use It All for Wages?
You should track your spending in the respective eligible use categories beginning now. The National Restaurant Association published a simple RRF expense tracker to aid businesses in monitoring these purchases. Tracking purchases this way will be helpful at year-end when reporting to the SBA your use of the funds. We also encourage establishments to create a specific RRF budget that correlates with the respective RRF eligible expense categories to ensure each purchase is properly tracked and that the award will be fully expended during the 37-month window.
While it may be easy to use the award solely on payroll costs, this may not be the best ‘bang for your buck’. Many restaurants and bars may also be eligible for the Employee Retention Credits. Initially established by the Coronavirus Aid, Relief, and Economic Security Act, and later modified by the Taxpayer Certainty and Disaster Tax Relief Act of 2020, the Employee Retention Credit (ERC) allows eligible establishments to earn credits for both 2020 (up to $5,000 per qualifying employee) and 2021 (up to $7,000 per qualifying employee per calendar quarter) on eligible employee wages. Eligible wages can NOT include those paid directly with funding from Paycheck Protection Program loans, or grants received under the RRF.
Therefore, it is important to be aware of how you are spending your various forms of relief to ensure you maximize your benefit under each respective program. Simply put, if you are eligible for ERC and you received the RRF, use that RRF award on costs other than payroll! Don’t miss out on significant tax credits that could provide much-needed aid. Consult with your tax advisor, or Windham Brannon’s restaurant team to help you determine the maximized use of your funds.
For more information on either the Restaurant Revitalization Fund or the Employee Retention Credits, please reach out to Maggie Wise.
