Financing

4 additional breaks for restaurants in the COVID recovery bill

The relief bill just passed by Congress contains more benefits for restaurants than just the $28.6 billion in direct aid. Here are some of the others.
Photograph: Shutterstock

Some operators may be tired of reading it: The landmark COVID relief bill signed into law by President Biden earmarks $28.6 billion in direct aid to restaurants. But the creation of a Restaurant Revitalization Fund isn’t the only provision that promises to ease the industry’s financial plight.

Here are a few additional benefits that may not be readily evident to the casual reader of the 242-page bill, along with a deeper dive into what restaurants are likely to benefit from the industry-specific Fund.

First, the basic benefits for restaurants
The bill’s biggest benefit for restaurants is undoubtedly the Fund, in part because it’s aimed solely at the industry, and in no small measure because it foregoes many of the limitations that frustrated operators under the Paycheck Protection Program (PPP).

Like the PPP, the Revitalization Fund will be administered by the U.S. Small Business Administration (SBA). Its considerable pool of assistance funding will be distributed in grants—not possibly forgive-able loans, but outright grants—in amounts of up to $10 million per restaurant company, but not more than $5 million per location. The grants are not taxable as income.

The eligibility amount will be determined by subtracting an applicant’s 2020 revenues from the 2019 figure, in keeping with the bill’s aim of offsetting the financial impact of the COVID-19 pandemic. The shortfall is reduced by any PPP funds that were provided.

The money can be spent on a wide array of operating expenses, including fundamental supplies such as food, beverages, packaging and protective employee gear.  Such big-ticket expenses as paying for the construction of outdoor dining areas are also covered. The outlays must have been made between Feb. 1, 2020 through Dec. 31, 2021. The leeway is much greater than what was permitted under the PPP, particularly in the latter’s early days.

To ensure the money goes to small businesses, only places that had fewer than 20 locations as of last March 20 are eligible. That doesn’t rule out chain operations, but effectively narrows the scope to small ventures and the franchisees who make up big chains. Publicly traded companies are ineligible.

About $5 billion is reserved for truly small foodservice ventures—places that had 2019 revenues of less than $500,000. An edge is also provided to what Congress adjudged to be the operators most in need—women, people of color and veterans. Only applications from those parties will be considered during the first 21 days of the program.

Extension of a key payroll tax break

Restaurants are he most likely users of the Employee Retention Tax Credit, a provision that allows employers to write off up to 70% of what they spent to keep employees on their payrolls despite the economic impact of the pandemic. The credit is taken against the employer’s portion of Social Security taxes, or up to $7,000 per quarter per employee.

It was created in December to reward restaurants and other businesses that retained their staffs through 2020 and the first half of 2021. The American Rescue Plan extends the coverage  by two months, or through August, according to the National Restaurant Association. 

Increased PPP spending

The Fund is intended to complement the PPP, not replace it. Indeed, it provides the PPP with an additional $7.25 billion in available funding, presumably for both second and first-time loans from the SBA. However, it does not extend the PPP’s deadline for applications of March 31.

More emergency-loan spending

Separate from the Restaurant Revitalization Fund and larger PPP pools, the bill earmarks an additional $15 billion for Economic Injury Disaster Loans (EIDL), a form of aid usually extended to victims of natural disasters such as hurricanes or earthquakes.

The measure would extend available funds to “severely impacted small businesses,” or ones that have suffered a loss of at least 50% of revenues and are struggling to meet a payroll of 10  or fewer employees.

Increased food-assistance funding

Many restaurateurs are unaware that participants in the federal food assistance plan known as SNAP, for Supplemental Nutrition Assistance Program, can account for significant portions of a value-oriented operation’s sales.  Take-and-bake pizza chains are prime examples.

Those businesses will be cheered to learn that the American Rescue Plan extends a 15% bump in SNAP funding through Sept. 30, a measure intended to ensure that fewer American families go hungry during the pandemic.

Restaurant operations that have been contracted to help feed Americans living in emergency shelters after losing their homes have a lower chance of seeing that source of business cut off. The relief bill calls for continuing to reimburse those facilities through the National  School Lunch Plan.  

Places that provide items like pizzas or hero sandwiches to schools through the lunch program may be heartened by the inclusion of $130 billion in funding to get K-12 facilities safely reopened.

President Biden signed the American Rescue Plan into law midday Thursday.

Correction: This story has been updated to correctly indicate that the ERTC's coverage has been extended two months from its previous sunset of June 30.

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