The American Rescue Plan: Key Provisions for Corporate and Transactional
By: Jonathan Richter & Steven Schmulenson
The American Rescue Plan Act of 2021 (“American Rescue Plan”) became law on March 11, 2021. The American Rescue Plan adds $7.25 billion and expands the eligibility requirements for the Paycheck Protection Program (“PPP”) established under the CARES Act (including businesses eligible to apply for the SVOG program, which may now apply for a PPP loan without losing their SVOG eligibility), adds $15 billion for the Targeted Economic Injury Disaster Loan (“EIDL”) Advance, adds $1.25 billion to the Shuttered Venue Operator Grants (“SVOG”) program established under the Economic Aid Act and authorizes $28.6 billion for grants to restaurants under the new Restaurant Revitalization Fund (“RRF”), of which $5 billion will be reserved for businesses with gross receipts during 2019 of less than $500,000. Below is a brief summary of these key features of the American Rescue Plan. The Small Business Administration (“SBA”) is expected to issue guidance with respect to the RRF in the coming weeks.
Restaurant Revitalization Fund
Who can apply for a grant?
Any entity that operates a restaurant, food stand, food truck, food cart, 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 the public or patrons assemble for the primary purpose of being served food or drink, is eligible to apply for grants under the new RRF.
Publicly traded entities are not eligible to apply for grants.
When can I apply for a grant?
The program is not yet open as of the date of this Business Bulletin. The SBA is expected to issue guidance with respect to the RRF in the coming weeks, which could include new rules and interpretations of the provisions of the American Rescue Plan.
When the SBA opens the application process, for the first 21 days, the SBA will prioritize applications from businesses owned and controlled by women or veterans and socially and economically disadvantaged small business concerns.
How much money can I get?
- For businesses in operation for all of 2019, the grant amount is equal to 2019 gross receipts minus 2020 gross receipts.
- For businesses that were in operation for only part of 2019, the grant amount is equal to the monthly average gross receipts for 2019, multiplied by 12, minus the monthly average gross receipts for 2020, also multiplied by 12.
- For businesses that opened after January 1, 2020 but before enactment of the American Rescue Plan, the grant amount is equal to payroll costs (defined as the same payroll costs for the PPP) minus any gross receipts received.
- For businesses not yet opened as of the date of application, the grant amount is equal to payroll costs calculated as of the date of enactment of the American Rescue Plan.
Currently, per the American Rescue Plan, an entity may apply on behalf of several business locations, but the maximum grant amount per eligible entity, together with any of its affiliates, is $10 million, with each physical business location limited to $5 million. Grant amounts are also to be reduced by the amounts any applicant has received from a First-Draw PPP Loan, Second-Draw PPP Loan or EIDL.
Grant amounts are still subject to further SBA guidance, and the above is subject to change and further calcification from the SBA.
Are there restrictions on how I can use grant money?
Successful applicants may only use the proceeds from grants to pay eligible costs incurred during the period from February 25, 2020 to December 31, 2021. As compared to the PPP, there are more eligible uses of RRF grant proceeds. Any unused proceeds must be returned to the SBA.
Eligible uses of grant proceeds include the following:
- Payroll costs (same payroll costs for the PPP)
- Payments of principal or interest on any mortgage obligation (which shall not include any prepayment of principal on a mortgage obligation)
- Rent payments, including rent under a lease agreement (which shall not include any prepayment of rent)
- Maintenance expenses
- Supplies, including protective equipment and cleaning materials
- Food and beverage expenses that are within the scope of the normal business practice of the eligible entity before the covered period
- Covered supplier costs (same covered supplier costs for the PPP)
- Operational expenses
- Paid sick leave
- Any other expenses that the SBA determines to be essential to maintaining the eligible entity
The American Rescue Plan authorizes a further $7.25 billion for First-Draw and Second-Draw PPP Loans, but the act did not extend the expiration date of the program, which is currently March 31, 2021. As of the date of this Business Bulletin, there is currently a bill moving through Congress to extend the expiration date, but for now, potential applicants should consider applying as soon as possible before the program ends.
The American Rescue Plan has established a new category of eligible non-profit entity applicants, the “additional covered nonprofit entity.” This category includes nonprofits identified in Section 501(c) of the Internal Revenue Code that were not already eligible to apply for the PPP, subject to certain restrictions on funding from lobbying activities and that they do not employ more than 300 employees. Internet-only news and periodical publishers with more than one physical location are also now eligible to apply for a PPP loan, subject to certain restrictions, including that they do not employ more than 500 employees.
Targeted EIDL Advance
The American Rescue Plan authorizes a further $15 billion for the Targeted EIDL Advance Program. First established under the Economic Aid Act on December 27, 2020, the Targeted EIDL Advance Program permits the SBA to contact EIDL borrowers that received less than the maximum $10,000 EIDL advance, are located in low-income communities and can demonstrate a 30% reduction in revenue during an 8-week period beginning on March 2, 2020 or later.
The SBA has stated that eligible borrowers do not need to take any action and that the SBA will reach out to those borrowers who qualify.
The American Rescue Plan authorizes a further $1.25 billion for the SVOG Program. In addition, the American Rescue Plan now permits would-be SVOG applicants to apply for First-Draw and Second Draw PPP Loans, even if made after December 27, 2020. Any such PPP loans will be deducted from the grant amount.
As of the date of this Business Bulletin, the SVOG Program is not yet open to applicants.
For more details about any of these programs, please see the SBA website, or contact a Raines Feldman attorney for the latest information.
Please be sure to check out our COVID-19 Client Alert and Resource Center, https://www.raineslaw.com/covid-19, for further information about the American Rescue Plan. as it becomes available.
If you have any questions or concerns about any of the information briefly summarized in this Business Bulletin or require any further information, please contact one of the following lawyers at Raines Feldman LLP:
Jonathan D. Littrell
+1 (310) 734-0396
Jonathan G. Richter
+1 (310) 730-4375