Help for Small Businesses–One State Use of CARES Funding

By Dick Hall-Sizemore

I owe the Dept. of Small Business and Supply Diversity (DSBSD) an apology. In an earlier post, I questioned whether the agency would be able to quickly distribute $120 million in grant funds. It turns out that its first checks went out in mid-August and it had to stop accepting applications on Dec. 9 because the amount of money designated for the program had been exhausted.

The program is called Rebuild VA. Approved applicants received awards of three times their average monthly recurring eligible operating expenses plus COVID-related expenses, up to a maximum grant of $100,000. To be eligible for an award, an applicant could be a corporation, pass-through entity, nonprofit organization, recognized tribe, sole proprietor, or individual contractor who met the following criteria:

  • Principal place of business in Virginia
  • 250 or fewer full-time employees
  • Operating prior to 3/12/2020
  • Currently in good standing with State Corporation Commission (if applicable), and
  • Engaged in legal activity.

Applicants to which any of the following criteria applied were not eligible:

  • Delinquent in Virginia state income taxes without a payment plan in place
  • Is a lobbyist
  • Owner or principal is more than 6o days delinquent on child support obligations, or
  • Is a wholly owned subsidiary or a division of a parent company.

The response to the grant program was overwhelming. DSBSD received 20,005 applications requesting a total of $1.1 billion, far in excess of what was available.  The agency awarded funding to 2,935 applicants (14.7%), for a total of $122.8 million.

The agency provided me a listing of the successful applicants and the amounts awarded. Of the more than 2,900 awards, 435 applicants received the maximum of $100,000. The average amount awarded was $38,341; the median grant was $24,656. According to a late December press release from the Governor’s office, more than 45% of the amount awarded went to “nearly 1,000 small businesses and nonprofits in low-income and economically disadvantaged communities and about $50 million was awarded to women, minority, and veteran-owned businesses.”

Based on a perusal of the list of awards, it seems that a significant proportion were to restaurants. However, the list does cover a wide variety of small businesses, including: an electric services company, a lumber company, medical and dental offices, hotels, a maker of boat canvas, beauty salons, nonprofit organizations, a day care center, and a Montessori school. Three names leaped out at me:

  • District Hemp Botanicals LLC ($83,443)—Here is the business website if you are curious.
  • Floyd Country Store ($74,917)—This is the venue in Floyd County widely known for its live bluegrass and old time country music concerts.
  • Cockeyed Rooster Café ($100,000)—The next time I am in the vicinity of Smithfield, I am going to have lunch at this place, based on the name alone.

The Rebuild VA program is an example of how the federal CARE funds have been used to keep some businesses open and tax revenue flowing in Virginia. However, with SBSD able to fund less than 15% of the applicants, it is obvious there was a great need for assistance. We all are aware of businesses that were not able to make it and closed permanently.

Speaking of taxes, these awards are apparently subject to the state income tax. The legislation being considered by the General Assembly dealing with the larger issue of the deductibility of expenses covered by federal PPP grants also addresses this revenue stream. The House would allow recipients to exempt up to $25,000 of an Rebuild VA grant; the Senate, up to $100,000 (the maximum grant).