Eligible and Non Eligible Businesses

“Eligible entities” are defined as:

• Restaurants, food stands, food trucks, food carts, caterers, bars, saloons, lounges, taverns, snack and nonalcoholic beverage bars, “licensed facilities or premises of a beverage alcohol producer where the public may taste, sample, or purchase products,” or “other similar places of business in which the public or patrons assemble for the primary purpose of being served food or drink,” including an entity located in an airport terminal, an entity that operates independently (has its own tax identification number) inside another business (i.e., a restaurant in a hotel or conference center), or a Tribally-owned concern (any concern that is at least 51% owned by an Indian tribe). 
• Bakeries, brewpubs, tasting rooms, taprooms, breweries, microbreweries, wineries, and distilleries must provide additional documentation to support that at least 33% of 2019 gross receipts were derived from on-site sales to the public.
• Inns will be eligible if on-site sales of food and beverage to the public made up at least 33% of total 2019 gross receipts.
• The Guide states, “To satisfy the statutory requirement for ‘place of business in which the public or patrons assemble for the primary purpose of being served food or drink,’ an eligible entity must have at least 33% in 2019 on-site sales to the public. The original business model of eligible entities that opened in 2020 or that have not yet opened should have contemplated at least 33% of gross receipts in on-site sales to the public. Those entities without additional documentation requirements, such as restaurants and bars, are presumed to have on-site sales to the public comprising at least 33% of gross receipts in 2019. All Applicants must attest in the application to the following: ‘The Applicant is eligible to receive funding under the rules in effect at the time this application is submitted.’ ”

Entities must be organized as C corporations, S corporations, partnerships, limited liability companies, sole proprietors, self-employed individuals, independent contractors, and tribal businesses.  All other types of businesses are ineligible.

Entities must have a valid Business Tax Identification Number (TIN), which can include an EIN, SSN, or ITIN. Applicants must provide a TIN for the business and all equity owners with a 20% or greater stake. The Guide covers details on what parties are considered owners; what type of number a sole proprietor should use; and more.

The entity must be currently open for business; temporarily closed; or planning on opening soon, with expenses incurred as of March 11, 2021. (as per last year's program)

Entities must not have filed for bankruptcy or must be operating under a confirmed plan of reorganization under a Chapter 11, Chapter 12, or Chapter 13 bankruptcy.

As of March 13, 2020, the entity must own or operate (together with any affiliated business) 20 or fewer locations, “regardless of name or type of business at those locations”

The American Rescue Plan Act defined an affiliated business as a business in which: 

• “an eligible entity has an equity or right to profit distributions of not less than 50%,” or   
• “an eligible entity has the contractual authority to control the direction of the business” 

SBA’s FAQ addresses the following concerns in regards to identifying affiliates:

• “Sole proprietors (and self-employed individuals) must count as affiliates all businesses reported on IRS Form 1040, Schedule C.”
• “A holding company (which is a company that owns real estate for the benefit of an operating business) whose sole purpose is to hold the real estate for the eligible Applicant business should not be counted as a location or affiliate.”
• “However, if Applicant business owns a holding company or management company that owns or manages a business other than the Applicant business, you must count these entities as separate affiliates and locations.”

If the applicant is operating under a franchise or “similar agreement that meets the Federal Trade Commission definition of a franchise in 16 CFR 436,” the franchise must be listed on the SBA Franchise Directory, if not listed, they must submit the Franchise Disclosure Document to the SBA.

Entities that are NOT eligible: 

• Entities that as of March 13, 2020, own or operate (together with any affiliated business) more than 20 locations, regardless of name or type of business at those locations  
• Permanently closed businesses 
• Entities with expired EINs, SSNs, or ITINs 
• Entities that have filed Chapter 7 bankruptcy, or that have filed a Chapter 11, 12, or 13 bankruptcy and are not operating under an approved (confirmed) plan of reorganization 
• Publicly traded companies 
• State or local government-operated entities 
• All nonprofit organizations 
• Entities with pending or approved grants under Section 324 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, known as Shuttered Venue Operators Grants (SVOGs) 

To aid operators in calculating their grant amounts, SBA has provided three separate calculations for eligible entities, based on when they began operations. We will take care of this for you, but in summary, they are:

1. Calculation 1: The simplest of the three, to be used by entities in operation on or prior to Jan. 1, 2019. Generally, this involves subtracting 2020 gross receipts from 2019 gross receipts, and subtracting any PPP loans received.
2. Calculation 2: For applicants that began operations partially through 2019. This calculation generally involves subtracting 2020 gross receipts from 2019 monthly average gross receipts multiplied by 12, and subtracting any PPP loans received. (These applicants can also choose to use Calculation 3.)
3. Calculation 3: For applicants that began operations on or between Jan. 1, 2020, and March 10, 2021; and for applicants that have not yet opened but as of March 11, 2021, but have incurred eligible expenses. These applicants would subtract 2020 and 2021 (through March 11, 2021) gross receipts from eligible expenses incurred between Feb. 15, 2020, and Mar. 11, 2021, and subtract any PPP loans received. Of note is that the American Rescue Plan Act based this group’s calculations on only their payroll expenses; the Guide now bases it on all eligible expenses, as described below. 

SBA explains that “For purposes of calculating funding amount, ‘in operation’ means the day the entity started making sales. This does not mean the day the Applicant registered with the Secretary of State to establish the Applicant’s legal entity.”

The application also comprises of a Calculation/Table 4 “for applicants that operate multiple locations using different calculations,” to aggregate the amounts together.

Note that any corrections after submission will restart SBA’s review and payment timeline; SBA says that it might take “upwards of 14 days from the time of resubmission” for them to complete review of the application. Corrections will need to be made through the application portal or by telephone, and new documentation will need to be submitted. No corrections will be allowed to awards after they have been paid.