Question: Our travel business needs an injection of cash. I understand it’s too late to apply for a Paycheck Protection Program (P3) loan, and it looks like Congress won’t be re-authorizing the program until January at the earliest. In the meantime, is there another source of federal government money available to us, and if so, how do we get it?
A: There are four federal loan programs that you can always try to access. Two have been around for a long time, one is newly available for small businesses and looks promising, and one is very difficult to access.
First, the Small Business Administration (SBA) still has Economic Disaster Loans (EIDLs) to meet financial obligations and operating expenses that would have existed even if the pandemic had not occurred. You must have 500 employees or less. The loans are funded by the SBA. The interest rate is set at 3.75% and you have up to 30 years to repay. The maximum loan amount is $ 150,000. The deadline to apply is December 21st. Visit here to apply.
Second, the SBA also offers an express bridging loan program for quick loans of up to $ 25,000. You can apply while waiting for an EIDL loan, or you can apply for this program alone until March 13, 2021. The express bridging loan application site is the same as above.
You can get an EIDL and an Express Bridge Loan even if you have already obtained a PPP loan.
Third, the Federal Reserve very recently lowered the minimum loan requirement under its new Main Street loan facility to $ 100,000 so that small and medium-sized businesses can participate in this $ 70 billion program.
Under this program, the Federal Reserve Bank of Boston will purchase 95% of the loans from any participating bank. You apply to a participating bank in your state and must meet the lender’s loan eligibility requirements. The list of banks is here.
The maximum loan is the lesser of $ 35 million or an amount that, added to your existing outstanding and unused debt, does not exceed four times your 2019 adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda. . In my opinion, this program is the most promising for previously profitable businesses that may show a need for more than $ 100,000 in cash.
The fourth, and least promising, is the Treasury Department’s $ 50 billion aviation industry loan program.
Some of the funds are said to be available for travel agencies, but it is still unclear whether the Treasury meets this requirement as it devotes its time to airline loans.
The interest rate is much higher than for other Covid loan programs, and there are restrictions on employee compensation, share buybacks, dividends, and reductions in employment levels.
As of June, 48 travel agencies had applied for these Treasury loans, and by mid-October, only one had been approved, so the program is clearly dysfunctional.