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Fewer than two weeks from its April 3 launch date, the $349 billion Paycheck Protection Program (PPP) has maxed out.
A core component of the $2 trillion CARES Act, the $349 billion program (handled by the Small Business Administration, or SBA) was designed to incentivize companies to keep workers under their payroll with low-interest, forgivable loans of up to $10 million for independent contractors (ICs), the self-employed and companies with fewer than 500 employees.
According to the American Society of Travel Advisors (ASTA), the plan’s shortcomings became apparent soon after its launch and prior to the official depletion of its funds.
“There are extraordinary problems, and not only with the distribution of money,” said Zane Kerby, president and CEO of ASTA, during a press call that took place the morning that the news of PPP’s depletion hit. “The SBA was not prepared to administer the program that was put into law by the CARES Act.”
He noted that many advisors attempting to utilize other programs within the CARES Act have also run into snags, all at a time when ASTA’s membership is reporting a 90-97% suppression in demand for travel.
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“It’s hard to watch our members go through what they’ve been going through” said Eben Peck, executive vice president of advocacy for ASTA. “It has been a two-week-long lobbying scramble with every industry under the sun trying to get relief, and we’ve been spending a tremendous amount of time helping members apply for the programs.”
It’s hard to watch our members go through what they’ve been going through. It has been a two-week-long lobbying scramble with every industry under the sun trying to get relief.
The SBA’s Economic Injury Disaster Loan (EIDL) program, which existed prior to the coronavirus outbreak, recently added a provision allowing small businesses and ICs to receive up to $10,000 in the form of a cash advance that did not have to be repaid while they wait for the rest of the loan to be doled out (what ASTA refers to as the “Emergency Economic Injury Disaster Loan Program”).
But it, too, was unable to shoulder its load of applicants; the department recently began capping such $10,000 grants to businesses with at least 10 employees. All other businesses were limited to $1,000 per payroll employee, with an overall loan limit of $15,000 — rather than the $2 million that was promised.
Although the EIDL program doesn’t have the same loan forgiveness measures as PPP, it was initially attractive because of the $10,000 provision and its repay period of 30 years, according to Peter Lobasso, senior vice president and general counsel for ASTA.
However, he notes that the recent changes limiting the grants have made it far less attractive, and, like the PPP, the program has now been completely dried out.
“Congress did take decisive action for round three to provide support to businesses of all sizes, and we appreciate that,” Peck said. “But more is going to be needed. In many ways, the intent of Congress regarding the CARES Act is not entirely being fulfilled, which is why we are asking them to go back to it immediately.”
What’s Next?In the short term, Kerby and his staff at ASTA have asked that Congress renew funding for both programs ahead of the release of round four of the coronavirus bill in what ASTA’s Peck is calling “‘round 3.5,’ or ‘the interim round.’”
“PPP has run dry and the emergency loans have run dry,” Peck said. “The Republicans want to replenish that by unanimous consent without having to bring all of Congress back to vote in person, and the Democrats want to do that, too, but they also want to add money for hospitals and state governments. Since these two programs have run out of money, I believe they are going to pass some sort of interim package in the very near future, before we get to round four.”
Since these two programs have run out of money, I believe they are going to pass some sort of interim package in the very near future, before we get to round four.
ASTA is requesting PPP’s fund ceiling to be extended to $750 billion, and the EIDL program be replenished with an additional $50 billion in funding, just two requests that join the list of priorities for round four’s release, which will likely happen in mid-May.
Other requests for long-term fixes for PPP include allowing businesses with up to 2,000 employees to apply; extending the program through Dec. 30, 2020; increasing the loan’s maximum threshold; and lengthening the loan’s terms, among other requests. The association is also asking that the PPP be open to nonprofits, such as ASTA itself.
Additionally, the association is keeping larger travel agencies — many of which may also be applying for loans from the U.S. Treasury Department’s Exchange Stabilization Fund — in mind. ASTA is echoing the recommendations of the U.S. Travel Association and the American Hotel & Lodging Association and specifically supporting an amendment that would provide the same type of loan forgiveness as PPP. It is asking Congress to impose additional requirements to airline carriers, and to provide additional funding for ticket agents under the $25 billion U.S. Treasury Airline Economic Stabilization Loan Program.
Regarding the new list priorities for round four, Peck says that the association will continue to “advocate for it as strongly as possible, and [will] see where it goes.”
“In round three, we also put out a lot of recommendations and pushed as hard as we could for each of them, and not all of them were adopted,” he said. “This is what we are starting with, and I’m confident that more funding will be added to PPP and emergency SBA loans, and that some of the eligibility criteria for PPP will be increased. You never know how it’s going to end up, but we put pen to paper, consulted members of all sizes and came up with this list.”
ASTA’s previous grassroots effort resulted in more than 28,000 responses sent to Congress ahead of the passing of the CARES Act. Now, ahead of round four, the association is urging advisors to contact lawmakers with the following requests as they work on long-term fixes to PPP:
- Request that SBA expand the network of PPP lenders as broadly as possible.- Encourage approved lenders to accept applications from all borrowers and not just those with a pre-existing financial relationship with the lender.- Increase funding for the program to $750 billion.- Add another $50 billion to the SBA’s Economic Injury Disaster Loan program.
Travel advisors can send their message to Congress here.
The DetailsAmerican Society of Travel Advisorswww.asta.org
Read more from TravelAge West about the COVID-19 outbreak.