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Financing

More restaurants have their Restaurant Revitalization Fund awards rescinded

An uncertain number of owners will not get their funds amid lawsuits claiming discrimination, putting pressure on lawmakers to replenish the pool.
Photograph: Shutterstock

Another group of restaurant owners were informed this week that their Restaurant Revitalization Fund (RRF) award grants were rescinded amid court judgments that found that the way the U.S. Small Business Administration awarded the funds were discriminatory.

A number of posters to Reddit forums noted that they received letters saying their awards were rescinded. The National Restaurant Association was able to confirm that the SBA, which administers the fund, sent letters to additional restaurants this week. 

“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,” Sean Kennedy, executive vice president of public affairs with the National Restaurant Association, said in a statement. “These operators owe rent. They have outstanding invoices, and their payroll is growing. 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.”

The additional letters came just more than a week after the SBA sent letters to 3,000 applicants who had previously been awarded grants that their awards had been rescinded. All of those recipients were women, persons from groups deemed socially and economically disadvantaged and military veterans. It's not certain how many operators had their grants rescinded this time. 

At issue is the administration’s targeting of groups it considers disadvantaged for the grants. Congress approved the fund with $28.6 billion, of which $5 billion was set aside for very small restaurant companies. The SBA also said that it would prioritize women, military veterans and socially and economically disadvantaged groups as a way to target businesses that were most in need.

But the funding ran out, and three restaurants sued the SBA in Tennessee and Texas arguing that the way the SBA was distributing the funds was discriminatory. In at least one instance, the plaintiff was helped by a conservative group that objected to the agency’s bias in distributing the funds.

Plaintiffs in two of the lawsuits prevailed and in another, a ruling in favor of the SBA was reversed on appeal. The decisions led the agency to rescind some of the awards.

“We regret to inform you that, due to recent court rulings, the SBA will not be able to disburse your Restaurant Revitalization Fund award,” the letter to the restaurants said. “SBA’s leadership is frustrated with this outcome and remains committed to doing everything we can to support disadvantaged businesses getting the help they need to recover from this historic pandemic.”

The Main Street Alliance, a small business advocacy group, said many of the plaintiffs in the lawsuit had already received their funds.

“Overall, it’s a slap in the face to small business owners across the country who have had the rug pulled out from under them to satisfy a conservative lawsuit with plaintiffs who have already received their funds, confirming the sinister and systemic racism which was the foundation of the complaint,” Sarah Crozier, communications director for the alliance, said in an email. “It’s one more broken promise to communities who have bared the brunt of the pandemic, and it’s unacceptable. Congress must immediately replenish the grants program, as well as broaden to small businesses across industries so that the hardest hit small businesses can receive the help they need.”

The SBA said in its letter that those applicants whose grants were rejected will see the status of their grant as “fully canceled,” though it said that it would maintain the application in place based on the date it was filed.

If Congress provides the SBA additional money for the RRF, it would process the application in the order received and those applicants will not have to submit a new application.

Still, the result has left thousands of restaurant owners out of funds they were initially promised and counting on Congress to refill the RRF so they have another shot.

EDITOR’S NOTE: This story has been edited to include a quote from Main Street Alliance.

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