SBA’s Restaurant Revitalization Fund Closes, Ends as an Unmitigated Disaster

The SBA has officially closed its Restaurant Revitalization Fund.

The Restaurant Revitalization Fund, part of the larger relief package released earlier this year, was intended to help restaurants that lost money during the COVID-19 pandemic. $28.6 billion in funding was to be released to struggling restaurateurs, prioritizing veteran-owned, women-owned, minority-owned, and economically disadvantaged businesses.

Though it was a band-aid compared to the $240 billion lost across the industry, it gave many hope. Still, much like the PPP and EIDL loans, it also sowed confusion.

On July 3, 2021, after months of waiting for some applicants, the SBA wrote:

Due to overwhelming demand, the SBA was unable to fund all qualified applications with the original appropriation provided in the American Rescue Plan Act. Those applicants who have not received funding as of this email will have their applications held within the application platform to allow for processing in the order received if additional funds are provided by Congress.

But that’s not the full story.

As mentioned, the Restaurant Revitalization Fund had a priority classification. Priority applicants were veteran-owned, women-owned, minority-owned, and economically disadvantaged businesses. This prioritization was contested from the start. But black-owned businesses shut down during the pandemic at twice the rate of other businesses — and women-owned businesses were also disproportionately affected.

Perhaps this wouldn’t have been an issue if the funds weren’t so sorely needed. Nearly $100 billion in funds were requested, but only $28.6 billion was made available.

Priority businesses were allowed to apply before non-priority businesses — until a lawsuit was raised by multiple white male business owners, including Jake’s Bar & Grill. In a panel of three judges, two out of three agreed that the practice was discriminatory. Funding was halted for minority businesses and pushed through for non-minority businesses.

Last week, it was reported that priority businesses — minority-owned businesses — were having previously approved funds clawed back. Because minority owners were directed to apply earlier than non-minority owners, they were again disproportionately affected by the change. According to The Times, nearly 3,000 already approved applicants had their funds rescinded after offer.

All applications, priority and non-priority, are now being held in the event that more funds are released. A few non-priority applicants have reported that they have had funds released to them even after the closure of the program, while minority applicants have reported that they have had their funds pulled permanently for minor errors, such as bank account issues.

The case of the SBA’s RRF is uniquely interesting because the SBA didn’t have the strength to enforce its own objectives. The Restaurant Revitalization Fund was designed to prioritize minority-owned and economically disadvantaged businesses — but, seemingly, it did not have the legal capacity to do so.

Interestingly, the SBA already runs a multitude of minority-targeted programs and loans.

Presently, social media is littered with comments from business owners who were promised funding that would never materialize.

In this situation, being promised funds and then not receiving them was materially worse than never being promised funds at all. These business owners had no reason to believe the SBA wouldn’t follow through. Many business owners made critical decisions based on the fact that funding had already been secured. Now, many restaurateurs are heading into the July 4th weekend with their futures even more uncertain.