SBA grants for restaurants owned by women, minorities halted by new lawsuit

The distribution of pandemic relief money to more than 2,900 restaurant businesses owned by women, veterans and disadvantaged people was halted last week following lawsuits by several White business owners. 

Restaurants in Tennessee and Texas alleged discrimination by the Restaurant Revitalization Fund, part of President Biden's American Rescue Plan. The program – which has delivered about $27 billion in relief funds to more than 100,000 restaurants – included a three-week period in May during which the Small Business Administration prioritized processing and funding requests from minority-owned businesses. 

Under the program, food and beverage providers are eligible to receive grants equal to their pandemic-related revenue loss, with a maximum of $10 million per business and $5 million per location.

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But a conservative legal group founded by Stephen Miller and Mark Meadows, aides to former President Donald Trump, filed a lawsuit in Texas on behalf of the owners of the restaurant Blessed Cajuns, arguing the Biden administration's attempt to prioritize aid based on gender and race is unconstitutional, according to Reuters.

The White House has countered that it's trying to prioritize relief for minority- and women-owned restaurants because relief efforts by the Trump administration overlooked those businesses.

A preliminary injunction issued by a court in Texas states that the SBA may continue approving funds for non-priority applicants, but cannot give aid to 2,965 "priority" applicants.

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"The SBA is not able to pay 2,965 priority applicants — including yourself — who were previously approved and notified of their approval," the agency said in a letter to affected applicants, a copy of which was obtained by the Nation's Restaurant News. "The SBA will not pay these claims because the legal conclusions in these court rulings would preclude payment." 

A separate lawsuit was brought forward by the Wisconsin Institute for Law & Liberty on behalf of Jake's Bar and Grill in Harriman, Tennessee, which is owned by Antonio Vitolo. 

"Given the limited pot of funds, this puts white male applicants at significant risk that, by the time their applications are processed, the money will be gone," Vitolo, who is White, argued in the lawsuit.

The fund launched May 3, and for the first 21 days, was only open to applicants from women, individuals who are economically or socially disadvantaged and veterans. By May 15, the SBA said it had received 147,000 applications from "priority" businesses seeking $29 billion in relief funds.

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"While we cannot comment on the specifics of the litigation, it is the north star of the U.S. Small Business Administration to assist underserved small businesses, and we’ll continue to do so," an SBA spokesperson said in a statement. "We remain committed to doing everything we can to support disadvantaged businesses in getting the help they need to recover from this historic pandemic and restore livelihoods." 

Although the $28.6 billion fund has been depleted, businesses may have a second shot to apply for aid. A bipartisan group of lawmakers introduced a bill last week that would add an additional $60 billion to the fund.