The travel industry has weathered great turmoil over the years, but no crisis has hit us as hard as COVID-19 has. At the end of March, Congress passed a massive stimulus bill known as the Coronavirus Aid Relief and Economic Security Act aka the CARES Act. The program was put into place to aid businesses during the heat of COVID-19. Travel was booming before COVID-19 hit and now it’s taking a 48% dip this year. Travel companies need to take advantage of the CARES Act so when travelers are ready to start traveling again, you can still be there to serve them.
Below we explain the major opportunities travel companies have to take advantage of through the CARES Act.
SBA Economic Injury Disaster Loans
The Economic Injury Disaster Loan (EIDL) Program allows any small businesses to obtain fairly fast loans of up to $2 million directly from the Small Business Administration (SBA). 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, may apply–that’s you travel agent!
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 SBA that need not be repaid even if the applicant is subsequently denied.
The Paycheck Protection Program
The Paycheck Protection Program (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.
This is by far the best new program for agencies as well as ICs and tour operators. This program subsidizes employee and related expenses so you don’t have to layoff your employees! This program can be partly or even entirely forgiven based on a complicated formula that essentially provides that the more employees you keep or bring back during the eight weeks after you receive the loan, the more the loan will be forgiven. Basically, keep yourself and your agents employed–and your loan could be forgiven!
You must submit an application to one of the 1,800 banks that are a regular part of the SBA’s loan program. You can apply through an existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union and Farm Credit System that is participating. Travel Advisors should find a local Small Business Development Center to better target which institution is best for them here.
One of the major new benefits is access to unemployment benefits to self-employed and IC workers. This is a major benefit because most workers on 1099 are not usually eligible for unemployment, but the CARES Act recognizes that this is a global pandemic and created an unprecedented need for relief for all types of workers.
Airline Economic Stabilization Loans
Another part of the bill was the $25 billion in loans and loan guarantees reserved for airlines and ticket agents that will keep the airline industry alive, but there are many more immediate options for travel advisors we have listed above.
If you have any questions regarding anything we mentioned above, reach out to your host agency for more information and assistance. There is a good chance they have already applied for one of these options described above. Travel agencies will weather this storm and come out even stronger in 2021. We’re all in this together!
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