Undeniably, the vacation rental industry has been absolutely shaken as a result of the spread of COVID-19. Companies are hurting badly, and I’m seeing it first-hand. Many are furloughing or laying off employees; some have gone dormant; and others have already closed their doors. If the restrictions and lockdowns on travel continue, many more vacation rental businesses will not survive. Fortunately, the government has come together to approve several aid packages to help small businesses in our industry.
These programs include the Economic Injury Disaster Loan (EIDL), the Families First Coronavirus Relief Act (Families First), the Coronavirus Aid, Relief, Economic Security (CARES Act), and state-based programs.
By far, the most impactful aid for vacation rental managers is a section within the CARES Act: The Paycheck Protection Program.
The Paycheck Protection Program (PPP), formed under the CARES act, is a $349 billion program that provides small businesses with cash-flow assistance through 100-percent federally-guaranteed loans. The best part . . . all or part of the loan may be forgiven.
Pretty much everyone in the vacation rental industry qualifies. PPP loans are available for businesses with no more than 500 employees, and companies must have been in operation as of February 15th, 2020.
Borrowers do not need to demonstrate actual economic harm in order to qualify. Instead, they simply need to make a series of good-faith certifications, principally that current economic conditions necessitate the loan to support ongoing business operations, and that the funds will be used to maintain payroll and address other covered expenses.
The main idea behind the PPP is to retain employees. The funds can be used for payroll and commission payments, group health care benefits/insurance premiums, mortgage, rent, utilities, and interest on any other debt obligations that were incurred before the covered period.
Businesses can receive roughly 2.5 months of payroll costs.
Payroll costs in this case are defined as salaries, sick leave, separation agreements, insurance premiums, retirement benefits or payment of state or local tax assessed on the compensation of employees.
For example, if you average $500,000/year in the payroll costs above, you can receive a loan for just over $100,000 ($500,000 / 12 = $41,667 x 2.5 = $104,167).
Use the online calculator on the right ->
to help calculate the amount you can get and how much will be forgiven.
Yes. There is a component in the PPP that businesses would be eligible for forgiveness on portions of their loans if used for certain costs like payroll, mortgage, rent, and utilities that are incurred during an 8-week period starting on the loan’s origination date. The amount of forgiveness is based on the number of workers retained (or rehired) vs. the same period previously.
However, it is important to note that the amount of loan forgiveness will be reduced if salary cuts exceed 25 percent.
EIDL Loans are provided directly from the Small Business Administration (SBA), and loans are available up to $2M. Rates are 3.75 percent, and terms are available up to 30 years.
EIDL Loans require:
Loans will be available immediately through SBA 7(a) certified lenders, which include banks, credit unions, and other financial institutions. The deadline to apply for the Paycheck Protection Program is June 30th, 2020.
SBA Lenders will begin taking applications for businesses and sole proprietorships April 3rd and for independent contractors and self-employed individuals April 10th.
We hope this calculator has been helpful. All attempts have been made to ensure its accuracy. However, we cannot guarantee the results provided here. Please consult with your SBA Lender or Attorney for more information.