Distressed restaurants are scrambling to contain the fallout from a recent court ruling that halted a Small Business Administration (SBA) relief program on the grounds that funding criteria were discriminatory.
The Restaurant Revitalization Fund (RRF), part of the US bailout adopted in March, provided $ 28.5 billion to businesses affected by the COVID health crisis. Congress created the fund to provide food and beverage suppliers with subsidies equal to their lost revenue from the pandemic, capped at $ 10 million per business and $ 5 million per location.
Over 362,000 businesses requested $ 75 billion in aid, which was far more than what could be met with the initial funding. The SBA initially sought to distribute the money by prioritizing historically underserved groups such as women, people of color and veterans.
However, the agency was forced to stop processing grants after a three-judge panel ruled late last month in favor of a Tennessee restaurant owner, who argued that his claim did not hadn’t been given priority because he was white. The effort was led by a conservative legal group.
The agency disclosed the funding stoppage last Thursday in a court filing, saying it “would only resume processing such applications once all previously filed non-priority applications have been processed, and only if the RRF n ‘is not exhausted beforehand “.
The struggle comes as many small businesses still grapple with challenges such as acute worker shortages that have challenged a recovery that has accelerated and rising costs slowly trickling down to consumers.
Sharokina Shams, spokesperson for the California Restaurant Association, told Yahoo Finance in an interview that it was “deeply disappointing to learn that nearly 3,000 distressed restaurants that were waiting for these funds will not receive this assistance.”
Meanwhile, the National Restaurant Association sent a letter to the SBA this week, urging the agency to find funding for applicants whose grant approval was revoked by the agency last week.
âThe letter of acceptance they received from the SBA represented a commitment to provide not only federal funding, but also some hope that they would survive to serve their community,â wrote Sean Kennedy, vice president. public affairs executive of the association. the letter.
âThe announcement that their grants will be awarded to others has left them confused, frustrated and scared that they will have to close their doors for good,â he said.
“We urge you to review all pandemic relief programs under your control for the prospect of proper reprogramming of federal dollars to fulfill your previous commitments to them,” he added.
‘A long way to go’
On Thursday morning, a bipartisan group of lawmakers introduced new legislation to top up the SBA revitalization fund with an additional $ 60 billion. The effort has been accompanied by growing appeals to Congress to help small businesses recover from the pandemic.
“Replenishing the Restaurant Revitalization Fund is the most important thing Congress can do to get its constituents back on their feet and help their communities thrive,” Erika Polmar, executive director of the Independent Restaurant Coalition said in a statement.
Across the country, optimism is on the rise as restaurants welcome diners back indoors, and the mass vaccination effort has sharply reduced new hospitalizations and deaths from COVID-19.
However, many small businesses are still operating in the red and need a financial lifeline just to keep their heads above water.
Shanny Covey, co-owner of the Blue Mango Restaurant Group in San Luis Obispo, Calif., Was fortunate enough to get her SBA grant just before the funding ended.
âI feel good. It’s like we can pay off some of these loans and not have that burden because with the loan repayments it would be more difficult to sustain the business,â Covey told Yahoo! Finance in an interview.
Covey and his business partner own four restaurants on the central California coast. She had applied for the RRF in early May for two of their small businesses. Still, she feared that hundreds of thousands of restaurateurs like her would compete for federal aid.
Yet even without additional funds, some restaurants say they might not get there even after the country has fully reopened.
Restaurants and food service businesses could have lost up to $ 290 billion in sales due to the pandemic, and 90,000 restaurants closed permanently or long-term in May, according to an analysis by the National Restaurant Association.
Tom Sullivan, vice president of the U.S. Chamber of Commerce, said this week that small business owners have growing hope for a recovery, but Congress needs to carefully consider its next policy steps.
“We need to convince lawmakers to resist the temptation to micromanage Main Street towards the recovery,” he told Yahoo Finance in an interview this week.
“If we can do that, then we will see small businesses being able to hire, grow their business and recoup the losses that have occurred in the past 15 or 16 months,” he said, warning that small businesses have “a long way to go before rebounding to pre-pandemic levels.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv
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