News Article

Pressure builds on SBA to disburse $180M in unused restaurant grants
August 11, 2022


By: Andy Medici

Pressure is mounting on the Small Business Administration to disburse about $180 million in unused Restaurant Revitalization Fund money.

This time, it’s from 73 lawmakers in the House and the Senate, who all signed a letter to SBA administrator Isabel Guzman, asking the agency to award the funding “immediately. That follows a recent letter by the National Restaurant Association calling on the SBA to do the same.

The lawmakers, which include Sen. Cortez Masto, D-Nevada, Rep. Earl Blumenauer, D-Ore., Senate Majority Leader Chuck Schumer, D-N.Y., Senate and Small Business Committee Chairman Ben Cardin, D-Md., said the money should be given first to the 7,000 applicants who were awarded grants but not able to receive funding.

“While we understand the remainder of the funding will not reach every business that applied, it is imperative that the SBA distribute every dollar to help as many struggling restaurants as is feasible,” the lawmakers wrote.

The SBA plans to eventually disburse the remaining RRF money

The SBA said earlier in August that it was waiting to disburse any unobligated funding until after “pending litigation was resolved,” although it provided no timeline and court cases can often take years to resolve.

The tussle over the remaining funding comes after Government Accountability Office reported there was $180 million in unobligated funding, about $24 million the SBA had set aside for potential litigation, and another $56 million that comes from RRF grants that were subsequently returned, as well as additional money the Treasury Department administratively offset and returned to the SBA

The National Restaurant Association previously pressed for the SBA to release the money immediately, stating that there was no provision in the legislation that funded the RRF for the SBA to keep a portion for pending litigation.

RRF lawsuits still pending

There are also a number of pending lawsuits regarding the SBA and the RRF, including several in June 2021 that successfully challenged a 21-day priority application period for restaurants owned by women, veterans and socially or economically disadvantaged people to apply for the grants and have those set aside. Court rulings by the U.S. District Court for the Northern District of Texas and elsewhere forced the SBA to freeze pending payments to 2,965 priority applicants.

While the SBA was unable to fund the applications of the remaining priority applicants, it was able to disburse grants to nonpriority applicants, effectively draining the program of its remaining funding.

It is unclear how long it will take to resolve any pending litigation or exactly how many lawsuits there are directed at the SBA and its RRF program.

The lawmakers also called on the SBA to take action to recover any funds that have been awarded to ineligible applicants or were fraudulently accepted. They cited the earlier GAO report stating the SBA does not require recipients to report their operating status, despite the law creating the RRF requiring businesses that permanently close to return unused funds to the SBA.

“SBA has itself identified potentially ineligible recipients, such as clubs and hotels that failed to meet statutory eligibility criteria. Money recovered from fraudulent and ineligible businesses can subsequently be used to help fund the many businesses who were unable to receive grants,” the lawmakers wrote.

Sean Kennedy, executive vice president of public affairs at the National Restaurant Association, said the organization appreciated the support of the lawmakers in ensuring the unused RRF funds are disbursed quickly and fairly.

“While $180 million is a small amount compared to the full amount needed to replenish the RRF, it will have an impact for the select restaurants who can now receive grants. We hope that SBA will have answers for the local restaurants waiting for more information soon,” Kennedy said.

What is the Restaurant Revitalization Fund?

The $28.6 billion RRF was created in March 2021, but the Small Business Administration closed it on June 30 of that year once funding was exhausted. The SBA said at the time that more than 278,000 applications were submitted to the program, but the agency was only able to fund approximately 101,000 of them.

Attempts to pump more funding into the program have failed too, with the most recent defeat being the $48 billion bill the Senate voted on in May. That legislation, which got 52 votes but needed 60 votes to overcome a potential filibuster, would have fully funded the RRF and provided billions more in grants to small businesses in specific industries.

Meanwhile, Sen. Ben Cardin, D-Md., chairman of the Committee on Small Business & Entrepreneurship and one of the lawmakers behind the Paycheck Protection Program, has introduced the Hard-Hit Small Business Relief Fund Act. The bill would include about $6 billion in grants by transferring remaining funding from existing SBA grant and relief programs.

The SBA has stressed in the past that it would be able to reopen the Restaurant Revitalization Fund quickly if Congress appropriated more funding.