The head of the Small Business Administration, Isabel Guzman, visited Chicago Friday as thousands of restaurant owners in the city digested a bit of bad news.
The SBA announced funds for its $29 billion restaurant pandemic relief program were exhausted, leaving nearly two-thirds of applicants out of the money.
Launched in April as part of President Joe Biden’s $1.9 trillion COVID-19 relief package, the Restaurant Revitalization Fund offered the struggling industry a lifeline in the form of grants to cover pandemic-related losses up to $10 million per business and $5 million per location.
In Illinois, 4,524 restaurants received grants totaling more than $1.4 billion, with an average grant of about $309,000, the SBA said.
The SBA did not disclose how many restaurants in Illinois applied.
Nationwide, the SBA received over 278,000 applications seeking more than $72 billion in funding. It awarded $28.6 billion to about 101,000 restaurants before closing the program June 30.
“When we launched this program, we communicated extensively that the demand was going to exceed the $28.6 billion,” said Guzman, who was appointed by Biden and sworn in as SBA Administrator in March. “We could not serve everybody. But we were very pleased that we were able to distribute the funds quickly and efficiently and that there was such interest.”
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Guzman, who spent Friday meeting with small business owners from Little Village to Wrigleyville, inherited a federal agency whose portfolio has expanded dramatically during the pandemic through emergency relief programs such as the Paycheck Protection Program, the Shuttered Venue Operators Grant and the Restaurant Revitalization Fund.
“The SBA has forever changed as a result of COVID in terms of its program breadth,” Guzman said. “We’ve gone from a $40 billion portfolio to over $1 trillion.”
The restaurant fund was the first federal pandemic initiative to specifically target the hard-hit industry.
With indoor dining closed in many states for much of the year, restaurant sales fell by $240 billion in 2020, nearly 27% below expected levels, according to the National Restaurant Association.
There were more than 25,000 restaurants in Illinois heading into the pandemic. That number is projected to fall below 20,000 in the post-pandemic landscape — without additional federal relief, according to Sam Toia, president of the Illinois Restaurant Association.
“We always knew the Restaurant Revitalization Fund was a solid down payment, but not enough to cover the urgent needs of the entire industry,” Toia said.
More than half the money distributed in Illinois went to 1,518 Chicago restaurants that received nearly $733 million. The average restaurant grant in Chicago was about $483,000, according to the SBA.
Toia said restaurants in Chicago’s central business district are among the hardest-hit in the state, as work-from-home and the prolonged suspension of tourism and events kept diners away.
“Restaurants in our central business district are not going to get back to pre-pandemic sales until we get conventions, business meetings and tourism back,” Toia said, pointing to the special summer edition of the Chicago Auto Show in July as a modest sign of hope. “Restaurants are still struggling out here, even though we are getting back to the new normal.”
Lawmakers and industry advocates are proposing a measure to replenish the Restaurant Revitalization Fund with $60 billion, but it is unclear if Congress will act on the measure with a larger infrastructure package on their plates.
Complicating matters, the RRF program ended in a swirl of controversy over the SBA’s efforts to prioritize women and minority applicants.
Last year, the SBA approved 5.2 million forgivable PPP loans worth $525 billion, but the program came under fire after banks allegedly prioritized larger clients — including publicly traded companies — ahead of smaller businesses.
The federal government relaunched the PPP in January with another $284 billion in funding and an increased focus on businesses left behind during last year’s program.
The restaurant fund was created with a similar focus to helped underserved owners. For the first 21 days, the SBA only accepted applications from restaurants at least 51% owned by women, veterans or the socially and economically disadvantaged.
In May, court rulings that the SBA’s policy of prioritizing those applicants for pandemic relief was unconstitutional forced the agency to halt the process and rescind nearly 3,000 approved applications.
“We were required to stop all processing,” Guzman said. “That included those businesses that were in process, and we were not able to move forward with funding for those restaurants.”
Underserved restaurant owners received about $18 billion from the program before the court order, the SBA said.
Guzman said the agency has been reaching out to restaurant owners who lost their approved grants, trying to find alternative programs to support their recovery.