4 Ways Hotel Owners Can Seek Financial Help During COVID-19
It seems like only a month ago we were all gearing up for travel. Spring Break was just around the corner, which meant naturally Memorial Day weekend getaways were nearby only to be capped off by Summer vacations. Now scores of would be travelers and hotel owners are grappling with “stay at home” orders and additional fall out from COVID-19.
The ramifications of this pandemic are expected to hit hotel owners hard. In fact, with domestic travel slowing at such an extreme pace, many hotel owners may have to close their doors if they can’t find ways to earn revenue.
Luckily, there are steps hotel owners can take to ensure business goes on after the pandemic ends. The government is offering several grants and loans for businesses adversely affected by the pandemic.
Here are some of the programs hoteliers can take advantage of:
As a result of COVID-19, the federal government has passed the CARES (Coronavirus Aid, Relief, and Economic Security) Act, which provides more than $300 million in aid to small businesses across the country. The legislation includes many loan and grant programs to assist businesses to maintain while experiencing a great loss in revenue.
Paycheck Protection Program
This assistance program allows eligible companies to borrow up to 2.5 times their average monthly payroll cost up to $10 million. The loan interest rates are low, not more than 4 percent. And depending on how a business uses the money part of the loan may be forgiven. This program is ideal for smaller hoteliers, who have less than 500 employees. Certain companies with up to 1,500 workers may be eligible. The Paycheck Protection Program has less stringent credit qualifications and loans do not require a co-signer or collateral. Visit the SBA Paycheck Protection website for more information.
U.S. Small Business Administration Economic Injury Disaster Loan Program
This disaster loan program is not new. But there has been an expansion to the program through the CARES Act. Typically the program goes to businesses and residents in a specific geographic region undergoing a natural disaster, but with the expansion, more businesses can become eligible. Companies in all 50 states and U.S. territories can apply for the disaster loan up to $2 million. Businesses can pay an interest rate of 3.75% and nonprofits would pay 2.75%. Companies can also receive a $10,000 advance on the loan. Visit the SBA loan program website for more information.
Apply for a Loan Forbearance
Hotel owners looking to reduce their expenses immediately should be able to ask their current lenders for a forbearance - specifically commercial mortgage-backed securities loans. Experts advise hoteliers to craft a letter to their current lenders outlining their need for payment forbearance, including their history of good payment, hotel occupancy rates, and the factors that may contribute to a more positive economic outlook in coming months. The letter can open the communication between the hotelier and lender and eventually lead to a reduction in payment or some other cost-saving measure for the short term. Visit the SBA Debt Relief website for more information.
New Business Tax Provisions
There are a few tax provisions under the CARES Act that may assist hotel owners. The 50% Employee Retention Credit for Employers provides a refundable payroll tax credit equal to up to 50 percent of certain qualified wages through December 2020. Another option is the Payroll Tax Payment Extensions program, which would postpone the deadline for payment of the employer’s share of the Social Security tax through the end of 2020. For details and information on how to apply visit, TaxFoundation.org.
How is the Naples Hotel Group and its hotels preparing for this pandemic? Read about it here.