For U.S. companies – WeTravel has partnered with Kabbage to connect you with Paycheck Protection Program relief funding. Click here to apply.
In response to the coronavirus COVID-19 pandemic, U.S. Congress has enacted the CARES Act – phase III of congressional measures to provide essential relief to the U.S. economy.
The Act introduces new funding sources to provide economic support to the business sector, employees, individuals, families, and various industries impacted in the wake of the pandemic.
We have compiled this guide for any U.S. travel businesses, non-profits, and other employers looking for government assistance or loans right now. In it, we have included some of the relevant initiatives the Act has made available through the Small Business Administration (SBA).
In addition to the provisions outlined by the CARES Act, there are existing SBA loans and various other relief programs available, which we will touch on as well.
Note that neither WeTravel nor any of its employees provide loan, tax, or legal advice. You should consult with your relevant advisor regarding your personal circumstances. While the content is deemed reliable, it has not been vetted or endorsed for accuracy by WeTravel.
Table of Contents
Funding From The CARES Act
Paycheck Protection Program
PPP – What To Do Next
Credit Support For Businesses Other Than Small Businesses
SBA Disaster Assistance
SBA Economic Injury Disaster Loan Program
Economic Injury Disaster Advance Loan
Additional Relief Programs
SBA Debt Relief
Income Tax Deadline Extended
State and Local Relief Programs
ASTA Recommendations For Travel Businesses
CARES is the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Notable relief provision from this is the Paycheck Protection Program (PPP).
The recently added Paycheck Protection Program, also known as Small Business Interruption Loans, is a $349 billion loan program. It is open to small businesses, self-employed individuals, and independent contractors impacted by the coronavirus.
Small businesses can borrow from it to pay employee salaries and qualified expenses including payroll support, mortgage payments, rent, utilities, interest, and other debt obligations.
To be eligible, they have to employ fewer than 500 people or meet the SBA’s industry-based size standards. No collateral or personal guarantees are required to apply.
Those who meet requirements may qualify for a loan up to $10 million. The amount will be two and a half times the average total monthly payroll for the year leading up to the loan. Newer businesses that have not been operating for that long can use the average payroll costs for the two months of January and February 2020.
Loan payments will be deferred for six months, and companies that use the funds to pay allowable expenses and maintain their workforce will be forgiven some or all of the amount used in the first 8 weeks following loan origination.
Qualifying businesses who took out an Economic Injury Disaster Loan (see below) between February 15 and June 30 may be eligible to refinance it into a PPP loan and add the outstanding loan amount to the payroll expenses.
We recommend that those who want to apply for the PPP and are eligible, act sooner rather than later.
This is because loans are being issued on a “first come, first served” basis, and there is a funding cap. Also, to qualify for loan forgiveness, the amount needs to be spent over an 8 week period before the end of June 2020.
Note that the rules for the program are evolving and change daily, so consult with your relevant advisor before submitting an application.
1. Roughly determine your eligibility to move forward with an application
- You have fewer than 500 employees or meet the SBA’s industry-based size standards
- The coronavirus must have impacted your business and funds are required to support it through the economic downturn
- Funds will be used to retain employees, maintain payroll, cover mortgage/rent, or settle utilities payments
- You haven’t already submitted an application or received a loan from the SBA to cover expenses listed above
2. Get in touch with your bank or a certified SBA lender
Your bank might be a certified lender so contact them first to see if you can apply through them and get the list of required documents. If they aren’t, find out who to contact.
3. Collect paperwork
To submit an application, you may need any of the following documents:
- payroll tax filings to verify the payroll and number of employees
- tax ID information or company documents
- draft or final tax filings for 2019
Work with your accountant, bookkeeper, payroll processor, and lawyer to ensure you submit the required documents.
4. Complete the application form
Completing the application form will give you an idea of what’s required for the application process and the certifications you will have to make.
5. Maintain clear records
To apply for loan forgiveness after June 30, you will need to submit documentation of the expenses paid during the eight weeks after receiving the loan, including payroll, rent, mortgage interest, utilities, and debt payments.
Additional PPP Related Resources For The CARES Act
More guidance on the Economic Stabilization Fund is expected in the coming days.
As an overview, the Secretary of the Treasury will administer loans and guarantees in conjunction with the Federal Reserve. This is likely to include businesses of more than 500 employees that would not qualify for Small Business Interruption Loans.
Ruling in the CARES Act declared that anyone self-employed is now able to claim for unemployment benefits. The benefit is available from each states’ local unemployment benefits agencies.
The SBA will continue to provide relief for business owners under its Economic Injury Disaster Loan (EIDL) Program.
It’s important to note that participating in this program may limit your participation in the PPP (Phase III assistance). The consensus on this is that you may apply for both programs, but funds have to be appropriated for different purposes.
The EIDL program existed prior to the pandemic. The program can provide working capital loans to help small businesses overcome the temporary loss of revenue. Funds can be used for accounts payable, fixed debts, payroll, and other bills arising as a result of the virus.
To access the funding, a UCC Lien will be placed against company assets, and unlike the PPP, no loan forgiveness is allowed.
Independent contractors, small business owners, and the self-employed may apply for this economic support. Amounts of up to $2 million are considered at an interest rate of 3.75%.
Note that these loans are issued by the government and there might be heavy demand and lengthy processing times due to favorable rates.
U.S. small business owners are also eligible to apply for an advance loan of up to $10,000 while waiting for their EIDL application to be approved. Should the applicant’s loan application be denied, they will not be required to repay the advance.
This grant can be used to maintain payroll, pay employee sick leave, or settle utilities such as rent.
Under this program, anyone with existing SBA loans is given immediate relief for loan repayments, interest, and fees for the next six months. The relief is also applicable to new loans taken out within six months of the CARES Act being enabled.
Federal tax filing originally due on April the 15th is now due on July the 15th for both businesses and individuals.
Individual states and municipalities are providing their own programs in the form of grants, small business loans, relief funds, and tax collection deferments.
Many B2B companies and utility providers are providing varying degrees of discounts, payment deferrals, or grants to small businesses. Check in with them to see what’s available for your travel business.
Phase II of the coronavirus stimulus, the Families First Coronavirus Response Act, provides tax credits for small businesses to cover qualifying sick leave for employees. The business has to employ fewer than 500 employees to be eligible.
Phase III allows for deferred tax payments of employer payroll taxes due at the end of 2020. 50% is due at the end of December 2021, and the balance at the end of December 2022.
There are also temporary changes to how net operating losses can be carried. Losses from 2018 through to 2020 can be carried back for up to five years. Alternatively, it can be carried forward for 2019 and 2020 income.
Lastly, amounts that can be claimed as interest expense deductions have increased from 30% to 50% for 2019 and 2020.
In this link, ASTA provides insights into the type of aid that independent contractors, SME’s, and large businesses in the travel industry can apply for.
We are navigating trying times and travel companies seeking financial relief should consult with the relevant professionals to get the best advice possible.
For more helpful resources related to helping travel businesses navigate COVID-19, take a look at our link here.