The SBA just canceled another round of restaurant relief payments: Here’s what we know so far

Joanna Fantozzi

On Wednesday around noon, the U.S. Small Business Administration sent grant cancelation letters to an unknown number of previously approved Restaurant Revitalization Fund applicants who were still waiting on their promised grants.

This round of rejection notices follows the previously announced 2,965 approved applicants whose payments were halted on June 14 following the outcome of lawsuits in Texas and Tennessee that barred the SBA from distributing grants on the basis of race and sex. The three separate lawsuits were filed against the SBA in April and May, claiming that the 21-day prioritization period of women and socially or economically disadvantaged individuals was a discriminatory policy.

 “These lawsuits have led to three court rulings that preclude us from disbursing award funds to you,” the letter sent on Wednesday to affected applicants said. “[…] In the coming days, SBA’s portal system will reflect that SBA will not be able to disburse your award.  Specifically, you will see the status of your application in SBA’s portal change to ‘fully canceled.’  This status change reflects only that SBA is not able to disburse your award.”

Although it is uncertain how many applicants received these notices, dozens of angry and frustrated posts were circulating on Reddit and Twitter on Wednesday from business owners who received the letters, and Nation’s Restaurant News spoke with five restaurant operators who corroborated the letters’ content. Many of the affected restaurant operators were previously approved between May 18^th and May 20^th.

Related:The restaurants that sued the SBA for discrimination received almost $1 million in Restaurant Revitalization Fund grants

The SBA declined to comment on any of the above and would not confirm whether or not a second round of letters were sent out.

The letter also implies that the delay in an update for this batch of applicants is a result of the SBA “reviewing your application due to an invalid industry flag” at the time that the SBA was told to stop prioritizing applicants. But even though this appears to be an individualized explanation for the application mix-up, each of the operators we spoke with received the exact same letter that mentioned the application’s “invalid industry flag.”

The notice ends by reassuring applicants that they need not apply again, and that “the SBA will continue to maintain your processed Restaurant Revitalization Fund application in its place in the application queue based on your date of application.”

Abraham Kwon, owner of Wildwood Café, a corporate cafe in Atlanta, Ga., applied for a Restaurant Revitalization Fund grant on May 3 on the day that the portal opened. Kwon said he was approved for a grant on May 20 and was told he would receive the money after 3-7 days. Since then, Kwon has called almost daily asking for status updates and was consistently told not to worry, that his money had been set aside and funding was just delayed.

Related:SBA halts restaurant relief payments to almost 3,000 women and minority-owned businesses following discrimination lawsuits

“I am floored,” Kwon said. “I need the money right now — we’re in an office building and even though people have started to come back to work, business is a fraction of what it used to be. My PPP loan and EIDL are long-gone. I brought back three of my best employees and now I’m going to have to take away their hours and raises.”

Kwon said that after speaking with the SBA hotline multiple times, he and multiple applicants were told by operators that the hotline was a third-party service contracted out by the SBA, and they did not have any internal knowledge.

Mathi Pothiyappan, owner of Cholanad, a fine dining Indian restaurant in Chapel Hill, N.C., also applied to the Restaurant Revitalization Fund portal on the day it opened and received approval for a $500,000 grant on May 14. He did not even care about being considered part of a priority group.

“I don’t like the disparities between priority and non-priority groups,” Pothiyappan said. “Because everybody struggled, right? It doesn’t matter what race you are. Everybody should have been put in the line and approved one by one. It worked with the PPP.”

Pothiyappan said that he watched both his neighbors, both in priority and non-priority group, apply and get approved for the Restaurant Revitalization Fund weeks after he did, and they received their funds no problem. Ironically, he said, if he had not been placed in a prioritization group and applications were approved on a first come, first-serve basis, he would have received his funding long before they did.

Pothiyappan, along with the other operators we spoke with, said he is considering legal action.

“I’m not going to let it go,” he said. “This has been one month of pain.”

Matt Buskard, owner of five-unit, Detroit-based gastropub Bobcat Bonnie’s, said he also wants to seek legal action after his first-day Restaurant Revitalization Fund application was approved on May 15 and later receiving the letter of rejection on Wednesday.

“We were told numerous times that the SBA was aware of the issue and working on fixing it- and that our approved funds were being allocated no matter what to us,” Buskard said. “They supposedly are approving them based on when the applications came in, but we found out that is not accurate or correct either: several folks who applied the next day got funded as non-priority folks. […] Now they are putting priority folks to the back of the line and approving non-priority before others no matter when the application came in.”

The National Restaurant Association has gotten wind of this latest development and is urging Congress to pass another round of the Restaurant Revitalization Fund.

“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. "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.”

Contact Joanna at [email protected]

Find her on Twitter: @JoannaFantozzi