Mark Pestronk
Q: I'm overwhelmed by the sheer number of similar-sounding loan and grant programs in the new Cares Act. What's the best program for small and midsize travel agencies, independent contractors and tour operators? How do we get the money, and how soon? Is there really a special program for airline "ticket agents," as I have read?
A: As of the end of March, a Cares Act program for which you can currently apply is the Economic Injury Disaster Loan (EIDL) Program, under which any small business can obtain fairly fast loans of up to $2 million directly from the Small Business Administration (SBA) here. The SBA has $10 billion to loan under this program.
Any business with 500 employees or fewer as well as sole proprietors and independent contractors (ICs) can apply. EIDL loans can be used for payment of fixed debts, payroll, accounts payable, employee sick leave and other bills that cannot otherwise be paid. The Cares Act also permits applicants for EIDLs to request an advance of up to $10,000 from the SBA that need not be repaid even if the applicant is subsequently denied.
However, the best new program for small and midsize agencies as well as ICs and tour operators may turn out to be the Paycheck Protection Program (PPP). It is designed to subsidize employee and other expenses and encourage employers to rehire laid-off staff.
To apply, you will submit an application to one of 1,800 banks that are a regular part of the SBA's loan program. As of late March, I could not find any such application forms online, but I am sure that you will be able to find some by mid-April.
The PPP is a $349 billion loan program that will enable all businesses (including ICs) suffering due to the coronavirus outbreak to borrow money for a variety of qualified costs including employee compensation (of those making less than $100,000), health care benefits, rent, utilities and interest.
The maximum amount for such a loan will be 2.5 times the average total monthly payroll for the 12 months before the loan was made, up to $10 million. No personal guaranties will be required.
The beauty of the PPP program is that the loan can be partly or even entirely forgiven under a complicated formula that essentially provides that the more employees you keep or bring back during the eight weeks after you get the loan, the more of the loan will be forgiven.
There are other emergency loan and small grant programs available through the SBA, and you can review them here.
The special, $25 billion program for airlines also provides money for "ticket agents," which is defined under federal law as a person who "offers for sale, negotiates for or holds itself out as selling, providing or arranging for air transportation." The details of the program are still under development at the Department of the Treasury, and guidelines should be issued by mid-April.
Clarification: A previous version of this column stated that a travel agency could include its compensation to independent contractors in calculating payroll for its Payroll Protection Program loan application. Although the law expressly states that this is the case, the Small Business Administration's new guidance states that IC compensation shouldn't be included, as ICs can apply for their own PPP loans.