State Contracts
NYSH&TA is currently working with Empire State Development (ESD) and the Governor's office in coordinating the procurement efforts for hotels that may be willing to offer space via state contracts to help with the current crisis. Currently they are trying to streamline things, and a form is in the works, so stay tuned.
SBA Details - Answers to member questions over the past few days
Right now, Small Business Administration (SBA) loans are available, but there are some questions surrounding them. There was a session held Friday on some of the details and we wanted to share them with NYSH&TA members.
The list of eligible businesses that can apply for the Economic Disaster Loan is lengthy, and different industries have different maximum thresholds to be considered a “small business”. The maximum number of employees for hotels and bed and breakfasts is 1,500, while the maximum average annual receipts is $32.5 million for hotels and $7.5 million for bed and breakfasts. The only excluded industries are agricultural, religious and charitable organizations and businesses involving gaming, such as casinos.
What is the SBA’s Economic Disaster Loan? This is the SBA’s first response to the COVID-19 Pandemic and the impact it is having on small businesses in the country. The SBA can deploy this tool without any further state or Federal legislation. Once a county has been designated a disaster area, the SBA can start providing funds to small businesses in that area. The SBA will probably add support to the Disaster Loan program, but any potential legislation is speculative at this point.
What is an Eligible Business? You must be physically located in a declared disaster county (all counties in NYS are on the list, and your business must have suffered working capital losses due to the declared disaster). As of today, all New York, Connecticut and New Jersey counties are included in designated disaster areas. You must also be a small business as designated by the SBA size standards, which depending on the type of business could be defined as a maximum of 250 to 1,500 employees, and have up to a maximum of $38.5 million of average annual receipts. Most major industries are included such as, hospitality and tourism, recreational industries, manufacturing, rental property owners, wholesale suppliers, utilities, healthcare and professional services. The only industries that are ineligible include agricultural, religious and charitable organizations, and businesses that involve gambling, such as casinos and racetracks.
What Does the Disaster Loan Provide? The SBA Economic Disaster Loan is a working capital loan. The maximum loan size is $2 million dollars and the funds can be used to cover overhead expenses, payroll, fixed debts of the business, accounts payable, etc. The Loan cannot be used for the consolidation of existing debts of the business, or for personal losses or expenses. The amount awarded is based on your estimated losses, which will be determined from the historical revenues and expenses of the business. The revenues as reported from both your tax return and monthly format, and your expenses as reported on your tax return. The loan has very flexible and beneficial terms and is intended to assist small businesses and not become an overburdensome component of your business financials. The interest rate on the Economic Disaster Loan is 3.75%, with repayment terms extending out thirty years, as determined at the time the loan is awarded to the recipient. The Disaster Loan payments are deferred for six months following disbursements. Loans of less than $25,000 do not require collateral, while those over $25,000 do, although the SBA has indicated it will be flexible regarding this requirement.
What is the Approval Criteria for the Disaster Loan? The main approval criteria for the Disaster Loan is that the business will be capable of making repayments on the Loan. It is assumed that the business will reopen and resume operations following the end of the Pandemic. The SBA will also look at past and current performance on federally guaranteed loans in evaluating the applicant for approval. If the business has failed to make payments on other federal loans, the business is not be eligible for the SBA Disaster Loan.
What can the Disaster Loan be used for? The Disaster Loan can be used for any legitimate business expense, including overhead expenses, insurance, payroll, fixed debts (i.e. mortgage loan payments), etc. The Disaster Loan cannot be used to consolidate the other debts of the business or pay for personal expenses. The business does not have to be closed or closing because of the Pandemic to be eligible for the Disaster Loan. If the business is still operating and suffering working capital losses, then it is eligible to apply. You need to demonstrate that the business has an economic injury or loss of revenue or an inability to open. For example, a restaurant that is only permitted to offer take out is probably suffering economic loss.
What is Application Process? The application can be filled out online at https://disasterloan.sba.gov/ela/. You need to select the correct application based on your entity’s business formation. In addition, you will need to include the tax returns for the business (if you have not filed for 2019 yet, the 2018 returns will be sufficient), which include all schedules, 1099s, etc. If you have been in business for less than one year and do not have a tax return yet then you will need to provide internal profit and loss statements for the time period that you have been in business. In addition, the application will ask the revenues of the business by month for 2017, 2018, 2019, year to-date on 2020, and forecasted revenues for the remainder of 2020, as well as a balance sheet for the business.
What Should be Included in the Additional Comment Section of the Application? This is an open narrative section to make your case for why your application for the Disaster Loan should be approved. In this section, you should include three to four sentences on how your business has been impacted by COVID-19 and description of injury. Although the reviewer understands what is happening to the US with regard to COVID-19, you should assume they are not completely up to date on what is happening in your State, and how many businesses have been closed due to executive orders. Also include in this comment section information on your ability to repay the Loan and your strategies for reopening your business once the Pandemic abates. This should also include strategies that you are utilizing for survival of the business.
Should you Apply for the Loan at this Time? This is specific to the current situation of the individual business. If you are not sure whether you should take the loan out at this time or whether you will need it at all, there is no harm in applying. There is no fee to apply and the first applications submitted will be the first acted upon by the SBA. Historically, the SBA takes 21 days to act on a loan application, but due to the events of the last week it will be a longer time period due to the amount of applications expected. While the SBA is reviewing your application, you can make the determination on whether you will really need the money. If you are awarded funds under the program you are not required to take them. In addition, there is no penalty to accept the funds and repay them early. Another reason to submit the application now is because as COVID-19 spreads throughout the country, many more counties will be designated disaster areas, and there is expected to be a massive influx of applications to the SBA. Also, as we expect there will be additional legislation regarding loans to assist businesses in the next few weeks, it is very likely that SBA will use the same portal for these programs, so your information will already be in the system, which ideally will make it easier and quicker for future loan applications.
Matthew Hosford, attorney at Jackson Lewis P.C. Contributed to this article.
COVID-19 Federal Hotel Leasing Program
NYSH&TA has taken a leading role in connecting hotel properties with state and local officials seeking hotels for use during the coronavirus pandemic. See below for details on the federal hotel leasing program now underway through the US Department of Health and Human Services.
If you are interested in leasing your properties to the federal government, please fill out the following online form: https://forms.gle/PfQfqkHMPbF5KMGi6.
Special thanks to the American Hotel & Lodging Association (AH&LA) for sending this information along for us to share with our members.