The Small Business Association (SBA) has announced they will soon begin accepting applications for the Restaurant Revitalization Fund.
During the opening 21 days of the program, the SBA will first review and process applications from those deemed “priority group” applicants. Businesses that do not qualify as a priority group applicant may still apply; however, such applications will not be processed until after the 21-day priority group period.
Those who apply for funding must self-certify that they qualify as a priority applicant, a list that includes small business organizations owned and controlled by women, veterans, or socially and economically disadvantaged small business organizations. The following covers the different priority group applicant pools and provides information to help you understand if your business qualifies.
The priority group status is available for small businesses only as defined by the SBA by industry (by NAICS code).
To qualify, a business must be for-profit, independently owned and operated (any legal structure), located and operating in the U.S. or its territories, and must not exceed certain limits set by the SBA. For example, for a full-service restaurant to qualify, average annual gross receipts cannot exceed $8 million.
See if your business qualifies under the industry size limits by using the SBA size tool here: SBA Size Standards.
Businesses Owned and Controlled by Women, Veterans, Socially Disadvantaged and Economically Disadvantaged
A business is considered owned and controlled by a priority group member if at least 51% of the business is owned by one or more persons within the qualified groups discussed below, and operations are managed by one or more persons within the qualified groups below.
The priority group includes women, veterans, and socially and economically disadvantaged individuals; Alaska Native Corporations; Indian tribes; or Native Hawaiian Organizations. While these terms are highly subjective, the SBA has provided guidance on qualifications under these classifications as follows:
- 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 are considered socially disadvantaged.
- Those socially disadvantaged individuals and groups whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged are considered economically disadvantaged.
While not all-inclusive, individuals identifying as a member of the following groups are presumed to be socially disadvantaged: Black Americans; Hispanic Americans; Native Americans (including Alaska Natives and Native Hawaiians); Asian Pacific Americans; or Subcontinent Asian Americans.
Evaluating the Economically Disadvantaged Classification
In evaluating whether an applicant falls under the economically disadvantaged classification, the SBA has stated it will evaluate various financial metrics. These metrics include net worth, adjusted gross income over the preceding three years, and the fair market value of the individual’s assets. Individuals exceeding any of the following three metrics are not considered to be economically disadvantaged for purposes of the priority group status:
- Net Worth of $750,000
Net worth of the individual, excluding ownership in the business under application; primary personal residence; contingent liabilities; retirement accounts; or income received from an S-corporation, LLC, or partnership which was reinvested in the company.
- Average Adjusted Gross Income of $350,000
Individual adjusted gross income averaged over the preceding three years, excluding income received from an S-corporation, LLC, or partnership which was reinvested in the company or was used to pay taxes arising from normal operations of the company.
- Fair Market Value of Assets of $6 million
Fair value of all the individual’s assets, including ownership in the business under application. The only assets excluded from this determination are the individual’s retirement accounts and primary personal residence
It is important to note that to qualify as a small business owned and controlled by socially and economically disadvantaged individuals, the applicant must meet both the socially disadvantaged and economically disadvantaged eligibility requirements.
Additional Relief and Qualifications
In addition to the priority group filing period, the SBA has set aside a portion of the total Restaurant Revitalization Fund of $28.6 billion for specific small businesses to ensure relief is available and provided to them, regardless of priority group status. While fund allocation may be adjusted, the following are currently set aside for applicants with 2019 gross receipts of:
<$50,000 | Funds allocated: $500 million
<$500,000 | Funds allocated: $5 billion
$500,001 to $1,500,000 | Funds allocated: $4 billion
The terms of the program and the application process have been continuously developing since the Restaurant Revitalization Fund’s creation under the American Rescue Plan Act, signed into law on March 11, 2021. Clark Nuber is closely monitoring program developments, so stay tuned for further information in the coming weeks.
If you have questions on whether you qualify as a priority group member or other questions about the Restaurant Revitalization Fund, please contact a Clark Nuber advisor.
Shelley Oswald is a senior manager in Clark Nuber’s Audit and Assurance Services Group.
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