Mark Pestronk
Q: Our travel business needs a cash infusion. I understand that it is too late to apply for a Paycheck Protection Program (PPP) loan, and it looks like Congress is not going to reauthorize the program until January at the earliest. In the meantime, is there any other source of federal government money available to us, and if so, how do we get it?
A: There are four federal loan programs that you can still try to access. Two have been available for a long time, one is newly available for smaller businesses and looks promising, and one is very difficult to access.
First, the Small Business Administration (SBA) still has Economic Injury Disaster Loans (EIDL) available to meet financial obligations and operating expenses that would have existed even if the pandemic hadn't occurred. You must have 500 or fewer employees. Loans are funded by the SBA. The interest rate is fixed at 3.75%, and you have up to 30 years to repay. The maximum loan amount is $150,000. The deadline for applying is Dec. 21. Visit here to apply.
Second, the SBA also has an Express Bridge Loan program for quick loans of up to $25,000. You can apply while you are waiting for an EIDL loan, or you can apply for this program alone until March 13, 2021. The site for applying for the Express Bridge Loan is the same as above.
You can get an EIDL and an Express Bridge Loan even if you have already gotten a PPP loan.
Third, the Federal Reserve has very recently lowered the minimum loan under its Main Street New Loan Facility to $100,000 so that small and midsize businesses can participate in this $70 billion program.
Under this program, the Federal Reserve Bank of Boston will purchase 95% of any participating bank's loan. You apply to a participating bank in your state, and you must meet the lender's loan eligibility requirements. The bank list is here.
The maximum loan is the lesser of $35 million or an amount that, when added to your existing outstanding and undrawn available debt, does not exceed four times your adjusted 2019 earnings before interest, taxes, depreciation and amortization, or Ebitda. In my view, this program is the most promising for previously profitable businesses that can show a need for more than $100,000 in cash.
Fourth, and least promising, is the $50 billion aviation industry lending program operated by the Treasury Department.
A portion of the funds is supposed to be available to travel agencies, but it is still unclear whether Treasury is following this requirement, as it has been devoting its time to airline loans.
The interest rate is much higher than it is for other Covid loan programs, and there are restrictions on employee compensation, stock repurchases, dividends and reductions in employment levels.
As of June, 48 travel agencies had applied for these Treasury loans, and as of mid-October, only one had been approved, so the program is clearly dysfunctional.