Operations

Texas, Tennessee lawsuits trigger cancellation of restaurant revitalization money

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June 25, 2021

The Restaurant Revitalization Fund, established to help commercial foodservice businesses recover financial losses caused by the coronavirus pandemic, has been hamstrung by lawsuits that are causing a delay in some applicants being able to receive grants they've already been approved for.

On Wednesday, the Small Business Administration sent out letters advising applicants that lawsuits have precluded the agency from disbursing funds.

"These lawsuits have led to three court rulings that preclude us from disbursing award funds to you," Angela Venti, director of practice growth at Cherry Hill, New Jersey-based Alloy Silverstein Accountants and Advisors, quoted the SBA letter. Venti said restaurants in Texas and Tennessee filed lawsuits against the SBA, arguing that prioritizing the RRF to groups based on race and gender was unconstitutional.

The SBA website did not mention the delay in disbursements as of Thursday, but the letter sent Wednesday said the agency's portal system would reflect that it would not be able to disburse the funds to the applicants receiving the letter, said Venti.

"Specifically, you will see the status of your application in SBA's portal change to 'fully canceled,'" the letter states, according to Venti.

In early June, the SBA announced that nearly 38,000 applicants were approved for more than $6 billion.

The National Restaurant Association sent the SBA a letter on June 17 after the agency alerted 2,965 small business restaurant owners that the agency would rescind approval for their RRF grants. Sean Kennedy executive vice president for public affairs, stated that "the announcement that their grants will be awarded to others has left them confused, frustrated, and afraid they will have to close their doors for good."

"Today's news that the SBA is yet again rescinding pledged grants is a blow to the small business owners who were already planning how the funds could help stabilize their businesses," Kennedy said in an email Wednesday. "These operators owe rent, they have outstanding invoices, and their payroll is growing."

The SBA did not answer questions from Vending Times sent via email Thursday.

Venti said applicants who received the letter Wednesday were told that they did not have to reapply for grants since the agency would release the funds when they can.

Lawsuits have been filed over the 21-day priority period, whereby the agency gives priority to small businesses owned by women, veterans or socially or economically disadvantaged individuals, said Venti, who spoke to someone at the agency who did not want to be identified. Applicants were asked to self-certify that they fit into one of these priority groups.

The 21 days began when the SBA began accepting applications in early May.

"It wasn't something they (the SBA) really wanted to talk about, and my guess is it's because of the lawsuits they're not able to say very much," she said. "The states are challenging, 'Was that fair that they (the priority applicants) were getting preferential treatment?'"

Venti said determining who is socially or economically disadvantaged is problematic for the agency since there is no way to acknowledge it on a tax form.

Meanwhile, Congress is in the process of authorizing an additional $60 billion in funding for the revitalization fund after more than 362,000 applications for a total of $75 billion in funding were received in the first three weeks the RRF application portal was open. The original bill announced in April provided $28.5 billion.

"Hundreds of thousands of restaurants are still vulnerable, which is why we continue to work with both houses of Congress to move the Restaurant Revitalization Fund Replenishment Act, so the SBA will have the funds they need to complete this important mission," Kennedy of the National Restaurant Association said in an email.

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