The Economic Injury Disaster Loan (EIDL) Advance program – which provided $10,000 to businesses that applied for an EIDL loan, whether or not the loan itself was approved – is officially out of money, the Small Business Administration (SBA) announced on Monday, July 13. The advance program had provided grants to businesses since the CARES Act was passed but reached the $20-billion funding limit set by Congress. The end of the grant program, which was among the government’s core responses to help businesses during the COVID-19 crisis, comes as other sources of relief for business owners also are drying up.
The Latest on the Main Street Lending Program
Recently, the Federal Reserve Bank of Boston released several documents for borrowers on the Main Street Lending Program. The Federal Reserve is working to operationalize the program and is expected to announce its launch soon. A recently updated Main Street FAQ document can be found here, which includes a checklist of items that must be included in the loan documentation as a part of Appendix A.
In addition, our partners at the U.S. Chamber of Commerce also created a guide and web page with additional resources and information. AAHOA encourages interested borrowers to contact an eligible lender to learn more.
Federal Reserve Expands Main Street Lending Program to Include More Small, Medium Businesses
The Federal Reserve Board recently expanded its Main Street Lending Program to allow more small and medium-sized businesses to be able to receive support. The Board lowered the minimum loan amount, raised the maximum loan limit, adjusted the principal repayment schedule to begin after two years, and extended the term to five years, providing borrowers with greater flexibility in repaying the loans. “The expansions announced yesterday to the Main Street Lending Program are the result of an extensive comment period, and are designed to better meet the needs of small and medium-sized businesses,” U.S. Treasury Secretary Steven T. Mnuchin said in a statement. “This should help support a broad-based economic recovery as the country reopens.” To learn more about the Main Street Lending Program, access U.S. Travel Association’s recently updated fact sheet.
The Latest Updates on the PPP
The PPP was passed by Congress as a part of the CARES Act to offer relief to small business owners damaged by the COVID-19 and was later amended by the PPP Flexibility Act. However, the program quickly ran out of money. Now, the House and the Senate have both passed new relief packages and are in the process of trying to find common ground. To make sure your voice is heard, it is critical that you write your representatives and urge them to approve additional relief for small business owners in the upcoming Congressional package. See an FAQ about the program here and a summary of the lending thus far here.
Recent PPP Policy Updates:
The U.S. Small Business Administration, in consultation with the U.S. Department of the Treasury, issued new and revised guidance for the Paycheck Protection Program (PPP). This guidance implements the Paycheck Protection Program Flexibility Act (PPPFA), signed into law by President Trump on June 5, 2020. To implement the PPPFA, SBA revised its first PPP interim final rule, which was posted on April 2, 2020. As described in detail in an announcement on June 8, 2020, the new rule updates provisions relating to loan maturity, deferral of loan payments, and forgiveness provisions. SBA issued revised PPP application forms to conform to these changes. SBA will issue additional guidance regarding loan forgiveness and a revised forgiveness application to implement the PPPFA in the near future.
Click here to view the new Interim Final Rules.
Click here to view the new Borrower Application.
Joint Statement by Treasury Secretary Steven T. Mnuchin and SBA Administrator Jovita Carranza Regarding Enactment of the Paycheck Protection Program Flexibility Act
June 8, U.S. Treasury Secretary Steven T. Mnuchin and Small Business Administration (SBA) Administrator Jovita Carranza issued a statement following the enactment of the Paycheck Protection Program (PPP) Flexibility Act, which also outlines upcoming procedures regarding issuing rules and guidance, a modified borrower application form, and a modified loan forgiveness application implementing these legislative amendments to the PPP. “We look forward to getting the American people back to work as quickly as possible,” they said.
Additional Updates from the SBA
June 9, the SBA issued an update for borrowers and lenders clarifying that the maturity of all Paycheck Protection Program (PPP) based on the enactment of the Paycheck Protection Program Flexibility Act of 2020. Guidance states that the maturity of all loans approved on or after June 5, 2020, will be for five years. The SBA loan system has been updated to reflect that all loans will automatically reflect the five-year maturity when submitted and approved. Loans approved and/or funded prior to June 5, 2020, with the two-year maturity may be extended by the lender and borrower mutually agreeing to a five-year maturity. Formal guidance on the changes to the CARES Act are forthcoming from the SBA.
May 19, the SBA posted its latest frequently updated Frequently Asked Questions Document, which includes new guidance (Question 48) for the question, “What is the deadline for lenders to complete the initial SBA Form 1502 reporting process?” In the guidance, the SBA says it’s extending the deadline for lenders to electronically upload the initial SBA Form 1502 reporting information to the later of: (1) May 29, 2020, or (2) 10 calendar days after disbursement or cancellation of the PPP loan.
May 18, AAHOA released a summary of recommended fixes to the PPP as a part of the HEROES Act, a $3-trillion COVID-19 relief plan that includes fixes for the CARES Act – among many other Democratic priorities – was approved by the House of Representatives on Friday, May 15, with a vote of 208 to 199. While AAHOA welcomes the changes to the PPP introduced in the bill, it is unlikely to pass in the GOP-controlled Senate. Here you can find a summary of the small-business provisions covered in the new proposed legislation, including PPP coverage periods, rehiring deadlines, loan forgiveness, the cap on non-payroll expenses, and more.
May 14, the SBA issued the newest FAQs on its Paycheck Protection Program, which tackles key issues of eligibility, audits, and forgiveness, with newly added FAQ 46 and 47. The new FAQ 46 is welcomed news for borrowers of $2 million or less, as it states these borrowers are assumed to have performed the certifications proving that such funds were necessary. Borrowers with loans more than the $2 million threshold “may still have an adequate basis” for making the required good-faith certification in light of individual circumstances; however, there is no further guidance at this time on what would constitute an “adequate basis” for the certification. The SBA indicated “all” loans more than $2 million will be subject to review, whereas prior guidance suggested these would be reviewed only upon an application for forgiveness. Also notable is new FAQ 47, which extended the deadline (from today, May 14, 2020, until May 18, 2020) for any borrower to return PPP loan proceeds to the lender if the borrower determines it had access to other funds at the time of the PPP loan.
The Economic Injury Disaster Loans (EIDL) program portal has reopened, but the SBA is currently only accepting applications from agricultural businesses – much to the disagreement and disappointment from the U.S. Travel Association. Please reference their newly updated EIDL fact sheet for more information.
Tuesday, May 5, the SBA and Treasury Department released additional information via their FAQ Document, which now includes FAQ No. 43. This new guidance states that the SBA is extending the repayment date for PPP loans to May 14, for “good faith” or safe harbor certification by the SBA. Borrowers do not need to apply for this extension. This extension will be promptly implemented through a revision to the SBA’s interim final rule providing the safe harbor. SBA intends to provide additional guidance on how it will review the certification prior to May 14.
Sunday, May 3, via updates to its FAQ document, the SBA and Treasury Dept. confirmed that PPP borrowers who attempt to rehire employees that were laid off will not have their loan forgiveness amounts reduced if those employees decline the offer to return to work. The SBA and Treasury said they would soon issue an interim final rule outlining that a borrower must have documented that they made a good faith, written offer of rehire to the employee for the same wages and number of hours, and include a start date. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation. Borrowers should have a thorough record of all offers made when you go to your financial institution to obtain loan forgiveness. The latest update to the FAQ also provide additional guidance for seasonal employers making borrower certifications to obtain PPP funding.
- SBA issued a new Interim Final Rule on Disbursements that addresses whether a borrower can take multiple draws from a PPP loan and thereby delay the start of the eight-week covered period; and by when must a lender electronically submit an SBA Form 1502 indicating that PPP loan funds have been disbursed.
- The Interim Final Rule on Seasonal Employees addresses disparity and ensures consistency in program administration by providing a seasonal employer the option of using any consecutive 12-week period between May 1, 2019, and September 15, 2019, for determining its maximum loan amount.
- The SBA and Treasury Dept. issued an Interim Final Rule on corporate groups and non-bank and non-insured depository institution lenders, which limits the amount of PPP loans that any single corporate group may receive to $20 million and provides additional guidance on the criteria for non-bank lender participation in the PPP
Last week, the SBA released How to Calculate PPP Loan Amounts to assist businesses in calculating their payroll costs for purposes of determining the amount of a PPP loan for which they can apply.
How to Apply
- Read the fact sheet
- Determine eligibility
- Understand FAQ
- Fill out the PPP Borrower Application (NEW as of June 12) and IRS Form 941
- Find an approved lender and work with them to apply
- Small businesses with 500 or fewer employees are eligible.
- You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. A list of participating lenders, as well as additional information and full terms, can be found at www.sba.gov.
- AAHOA recommends that all potential applicants consult with their bank, accountant, attorney, and/or other advisor so you understand how the loan may be used to both maximize loan forgiveness and minimize potential liability.
AAHOA Member Financial Institutions* Participating in the Paycheck Protection Program
*Please note, the following financial institutions are only accepting current/existing customers
CLUB BLUE MEMBER
Mag Mile Capital
Learn about Mag Mile's latest initiative with PPP loans
Creative Lending Solutions
Prajesh N. Patel
Fountainhead Commercial Capital
Live Oak Bank*
*If you are not a current Live Oak Bank customer, you can fill out this form to be notified by email once they have opened up the program to other businesses that are not current customers.
561-508-7558, ext. 1
CMBS Resources & Links
April 29: AAHOA President & CEO: Leaders in Washington Must Act to Provide Immediate Liquidity
In an op-ed published today on Hotel Management, AAHOA President & CEO Cecil P. Staton addresses how the PPP does virtually nothing to help small-business owners pay commercial mortgages. “Owners trying to stay current on or renegotiate commercial mortgage-backed security loans face a series of obstacles that could not only end up killing their businesses but also upend the fixed income market,” Cecil writes. “A series of CMBS loan defaults would create a significant market disruption that could negatively impact pension plans and other consumer-facing investment vehicles.”
Contribute Your Thoughts to our Latest Survey on CMBS Loans
AAHOA would like to hear about how you are handling your CMBS loans during the COVID-19 pandemic, including requests, communication, and forbearance. Our latest questionnaire should take less than 10 minutes to complete, and your feedback on CMBS loans will help guide our outreach efforts to the appropriate elected officials and agency employees.
Take Our Brief Survey
The CARES Act: Information for America's Hotel Owners
The CARES Act provides small businesses with immediate liquidity, which will address the need for capital used to make payroll and cover operating expenses. AAHOA applauds Congressional leadership for expediting this critical relief package. The passage of the CARES Act provides AAHOA’s advocacy team an opportunity for further conversations with the Trump administration and Congressional leadership regarding the necessary assistance small businesses need to weather this national pandemic.
We are expecting additional relief packages in the coming weeks as our government responds to the economic crisis sparked by COVID-19, and AAHOA is dedicated to advocating on behalf of America’s hoteliers throughout the duration of this legislative process.
CARES Act Resources
CARES Act FAQ Courtesy of U.S. Travel Association
Where do I apply for each type of grant or loan? Are they all available to apply for now?
Some of the new loan features are available, some are not. To find the most up to date information, please visit the SBA here. You can use the site to find where to apply for the loans, but in general:
- SBA Economic Injury Disaster Loan: Apply with the SBA here.
- SBA Interruption Loan (Paycheck Protection Program): Apply through an authorized Bank or Credit Union beginning either April 3 or April 10, depending on your eligibility category. More information is available here. You can find the list of SBA-approved lenders in each state or region here.
What is the cap on each different type of loan?
Actual loan amounts are based on need (e.g. expenses, payroll, etc) and other requirements (e.g. collateral, risk, etc.), but the maximum size for each loan is:
- SBA Economic Injury Disaster Loan: $2 million
- SBA Interruption Loan (Paycheck Protection Program): $10 million
Do you have to pick and choose one between the Disaster Relief Loan and the Paycheck Protection Program loan? Or can I apply for both?
No, but they generally can’t be used to cover the same expense. Since Economic Injury Disaster Loans are available now, they should be the first choice for relief. An Economic Injury Disaster Loan can be folded into a Paycheck Protection Loan (Interruption Loan), but not vice versa. The Paycheck Protection Program is designed to be supplemental to the Economic Injury Disaster Loan program, covering expenses that can’t be covered by an Economic Injury Disaster Loan alone.
How soon could I expect relief from each type of loan?
Turnaround times may vary, but based on history:
- SBA Economic Injury Disaster Loan: 2-3 weeks for the full loan, but 3 days for $10,000 cash advance.
- SBA Interruption Loan (Paycheck Protection Program): N/A, new program
After the CARES Act was enacted, many hoteliers have questions as it relates to eligibility, provisions, and next steps. The U.S. Travel Association has compiled extensive resources on its CARES Act page, including a CARES Act webinar recording, which can be accessed here (alternatively, you can also view the full slide deck).