American Rescue Plan Act of 2021: small business relief

President Joe Biden signed the American Rescue Plan Act of 2021 into law Thursday, March 11. The new legislation comes as a follow-up to the 2020 Coronavirus Aid, Relief and Economic Security Act (CARES Act), the Families First Coronavirus Response Act (FFCRA), and the Consolidated Appropriations Act. 

The $1.9 trillion relief plan from the federal government includes benefits for individuals in the form of increased unemployment compensation funds, $1,400 economic impact payments, increased child tax credits, earned income tax credits, and more. 

The bill also includes several provisions aimed at helping small businesses, with an emphasis on relief for restaurants and bars that have been severely impacted by the devastating effects of the COVID-19 pandemic. 

Note: The government has mentioned that there may be further negotiations and additions to what’s covered by the new legislation. We will update this article as more information becomes available. 

Restaurant Revitalization Fund 

One of the biggest small business resources in the American Rescue Act is the establishment of the $25 billion Restaurant Revitalization Fund, which provides grants to make up for a restaurant’s pandemic-related revenue losses of up to $10 million, limiting the grant per physical location to $5 million.  

Restaurants may use the funding for:

• Payroll costs 
• Mortgage and rent payments 
• Utilities and maintenance expenses
• Operational expenses 
• Paid sick leave 
• Supplies 

The fund, which will be administered by the SBA, allocates $5 billion to restaurants whose gross receipts in 2019 were less than $500,000. During the first 21 days of the program, the organization will prioritize women- and veteran-owned restaurants, as well as those that are owned by socially and economically disadvantaged individuals. Read the SBA’s clarification on which businesses fall under these categories. 

Public and government-managed businesses, entities, and affiliates with more than 20 locations are not qualified to receive the grant. Businesses also are not eligible to receive the grant if they applied for a shuttered venue operator grant. 

The SBA is planning on accepting applications in the next few weeks. We’ll update this article with a link to the application when it becomes available. 

Shuttered venue operator grants

Funding for shuttered venue operators grants, which are also administered by the SBA, was increased by $1.5 billion. The grants are meant to help the following businesses who had at least a 25% decrease in revenue during any quarter of 2020: 

• Live venue operators
• Theatrical producers
• Live performing arts organizations
• Motion picture theater (movie theater) operators
• Museum operators
• Talent representatives 

Under the Consolidated Appropriations Act, businesses that received a PPP loan after December 27, 2020 were not eligible to apply for the grant. However, the American Rescue Act removed that restriction.

Instead, the PPP loan amount a business received after December 27 will be deducted from the amount that can be received in shutter venue operators grant funding. 

Tax credits

Paid family and medical leave

The American Rescue Plan Act extends and increases the paid leave tax credits that were made available to employers under the CARES Act and the Consolidated Appropriations Act. 

Between April 1, 2021, and September 30, 2021, employers who voluntarily offer paid leave to eligible team members will receive a tax credit. The limit on the credit was increased from $10,000 to $12,000 per employee. Providing leave is not required. 

The tax credits are available to employers who provide paid sick and family leave for employees who are:

• Getting the COVID-19 vaccine
• Recovering from any injury, disability, or condition related to the vaccine
• Awaiting the results of a COVID-19 test or diagnosis 

The new law added a non-discrimination clause, meaning employers who discriminate in favor of highly compensated employees, full-time employees, or employees with tenure when providing the leave will not receive the credit. 

Employee retention 

The Employee Retention Credit was originally set to expire on July 1, 2021 under the Consolidated Appropriations Act, but the American Rescue Act extended the provision availability to December 31, 2021. 

The Employee Retention Credit is meant to encourage employers to keep team members on their payroll even if they aren’t working due to COVID-19 during the covered period. If a business does keep employees on payroll, it can claim a credit for paying qualified wages to the team. 

Businesses that saw a 50% decrease in gross receipts are eligible for a 50% refundable payroll tax credit against the employer portion of Medicare tax on wages paid up to $10,000 during the pandemic period. 

Businesses with more than 100 employees can claim the credit for team members who are retained but not currently working. For businesses with 100 or fewer employees, the credit can be claimed for all employees. The new relief plan also extends eligibility to new startups that were established after February 15, 2020, and have annual gross receipts of up to $1 million. 

The new rules also include an added provision for “severely financially distressed employers.” If a business experienced a gross receipts reduction of more than 90% when compared to the same quarter in 2019, all wages that were paid to employees can be considered qualified wages, regardless of how many full-time employees there are. 

Visit the IRS’ page on the employee retention credit to learn more about how to claim it. 

Additional loan program funding

The American Rescue Act added resources to certain loan funds to provide further assistance to more business owners. 

Paycheck Protection Program

The new act added $7.25 billion to the Paycheck Protection Program (PPP), which provides loans to small businesses that can be fully refundable as long as they are used correctly. 

While the American Rescue Act did not extend the deadline to apply for the PPP from its current date of March 31, 2021, the legislation did decrease the eligibility standards from what was previously stipulated in the PPP guidelines for nonprofit organizations, digital media companies, sole proprietors, independent contractors, and people who are self-employed. 

Learn more about the program in our articles about how to apply for the PPP and what it takes to receive full forgiveness. 

Economic Injury Disaster Loan 

The government also increased funding for the Economic Injury Disaster Loan (EIDL) by $15 billion. The program is meant to provide aid to businesses that are experiencing loss of revenue due to COVID-19. 

The SBA administers the loan and provides enough funding for businesses to cover financial obligations and operating expenses that they otherwise would have been able to pay for under normal circumstances. 

The organization is targeting ⅓ of the funding to businesses that: 

• Have fewer than 10 employees
• Suffered a revenue loss of greater than 50% compared to the same quarter last year
• Are located in low-income areas

Learn more in our article about how to receive an EIDL.