In March 2021, Congress passed the $26.8 billion Restaurant Revitalization Fund to assist small business that had been impacted with the Covid-19 pandemic. This money has been distributed to small business owners, as a grant that they will not have to repay if it is used by March 2023. The Small Business Association (SBA) has been processing “priority” applicant for the grants. A priority applicant is any woman, veteran, or minority-owned small business owner. Individuals who qualified as such were considered and prioritized for grant funds regardless of whether non-priority applicants filed prior to them. This however, led to a lawsuit and review by the U.S. Federal Court of Appeals.
In late May 2021, the U.S. Federal Court of Appeals affirmed a preliminary injunction on the SBA’s Covid-19 Restaurant Relief funds. Since the injunction, the SBA has announced they have stopped processing restaurant relief applications for priority applicants and has further pointed out that its decision to reluctantly do so is attributed to the recent and ongoing litigation over how aid is being distributed.
What does the SBA injunction mean for small business owners?
Unfortunately, small business owners have no choice but to wait. Since the affirming of the preliminary injunction, the SBA has announced that they will be halting all priority applicants and processing all non-priority applicants that had been surpassed by those that qualified as priority. As such, the funding to priority applicants will begin when all non-priority applications have been processed and addressed and will only begin if funding remains. However, the SBA is also working on replenishing its funds. If Congress passes the replenishment of such funds, SBA Chief Isabel Guzman has assured lawmakers that applicants whose application review and fund distributions have been halted will be automatically put in a queue for consideration of a grant.
Small business owners should remain hopeful that Congress replenishes these funds, specifically those owners who are in a current state of “limbo” since they were authorized for grants but have been deprived of them since the injunction. The SBA has stated its efforts to do everything they can to support disadvantaged businesses in getting the proper assistance needed to recover from the pandemic and will direct all affected applicants to other resources for funding in the meantime.
Are banks liable for rejecting my SBA funds?
In light of the recent injunction granted by the U.S. Federal Court of Appeals, banks are not liable for rejecting SBA funds to be distributed. Because the SBA has announced they will not be processing the applications that were already approved, this in turn leads banks to halt the process as well.