With passage of the Cares Act agencies have options for relief

Amid juggling Covid-19-related cancellations and rebookings,
travel agencies have been trying to understand what financial relief
options are open to them and their advisors following the March 27
passage of the $2 trillion Coronavirus Relief and Economic Security Act

The Cares Act introduced several new funding sources for
agencies of all sizes in addition to the preexisting Small Business
Administration (SBA) Economic Injury Disaster Loans. 

As of April 1, some unknowns remain about the provisions
of the Cares Act, but many agencies were expressing hope that additional
financial assistance would offer a shot in the arm for surviving
the coronavirus crisis.

“Whatever [aid] is out there, we’re going to try for,” said
Dave Hershberger, ASTA’s chair and president of Prestige Travel Leaders in
Cincinnati. “I don’t think this is a short-term thing. This is going to take a while.
But I think if you position yourself and you’re proactive, when we come out on
the other side, the agencies and the advisors that have done these steps will
be as strong or stronger than ever before.

“Whether that’s in three months, six months, a year, I don’t
know,” Hershberger added. “But I think it’s really important not to sit back
and wait to see what happens. Hope is not an action plan. You need to take

Available aid

Under the Cares Act and outside it, there are several
types of aid available:

• SBA Economic Injury Disaster Loans: These loans of up to
$2 million existed prior to the Cares Act. They are open to small businesses
with fewer than 500 employees, including independent contractors (ICs) and the
self-employed. The interest rate for for-profit businesses is 3.75%.
Small-business owners in all U.S. states and territories are eligible to apply
for the loan, based on impacts from coronavirus.

Additionally, small-business owners can apply for a loan
advance of up to $10,000. According to lawyer Mark Pestronk, Travel
Weekly’s Legal Briefs columnist, that loan advance does not need to be repaid,
even if the loan application is denied. The funds can be used to cover business
expenses like payroll, rent and utilities.

• SBA Paycheck Protection Program: This program was
introduced under the Cares Act and is funded with $349 billion. It is open to
any business with 500 employees or fewer, including ICs and the self-employed.
The SBA said the program is designed for small businesses to keep workers
employed. The maximum loan amount is $10 million, and loan forgiveness is
possible if the funds are used for payroll costs and other business expenses.
The program was expected to roll out on April 3. Funds will be made
available through SBA-approved loan institutions.

• Emergency Stabilization Fund: Under this program, the
Treasury Department will administer $500 billion in loans and loan guarantees
in conjunction with the Federal Reserve. According to ASTA, this fund is
designed for companies with 500 or more employees. Of that $500 billion, some
$25 billion is specifically set aside for airlines and “ticket agents,” meaning
travel agencies. ASTA president and CEO Zane Kerby said on April 1 that more
guidance about this program was expected.

• Unemployment benefits for ICs: The Cares Act declared that
the self-employed are now eligible for unemployment benefits. In the travel
industry, that is largely applicable to ICs. This benefit will be administered
through individual states’ unemployment benefits agencies. ASTA is compiling
member resources for how to apply.

• Other related state-level programs: For example, Prestige
Travel Leaders cut its 15 W-2 employees’ work time by 50% but enrolled in
SharedWork Ohio, a program that enables those employees to get a portion of
their reduced salary back in the form of unemployment, Hershberger said. Some
other states have similar programs.

What ICs should do

Kerby encouraged ICs to file for unemployment as soon as

“That might be the single biggest program, at least in the
short term, that will save and replace income for our members,” he said.

To qualify, ICs only need to certify they have been
adversely impacted by the coronavirus but otherwise would have been able to
work as usual, ASTA general counsel Peter Lobasso said during a March 30
webinar. Payment is based on the IC’s net income for 2019, and there’s an
additional $600 per week for up to four months from the Cares Act.

Pestronk concurred about applying for unemployment
immediately. He also encouraged ICs to apply for an Economic Injury Disaster
Loan from the SBA at the same time.

What small and midsize agencies should do

Agencies with fewer than 500 employees that are experiencing
financial distress should apply for both SBA programs, Kerby advised.

“Get in line right now, because there will be heavy demand,
obviously,” he said.

Many agencies have already begun that process, including
Prestige Travel Leaders and VIP Vacations in Bethlehem, Pa. While the SBA has
not stipulated a timeline for getting an approval or denial, both agencies
applied for Economic Injury Disaster Loans and have already been notified they
can request the advance of $10,000 from the SBA.

Jennifer Doncsecz, president of VIP Vacations, said that for
many agencies, $10,000 isn’t much but it’s “better than nothing.” She
encouraged agencies to apply for an Economic Injury Disaster Loan quickly, as
she has concerns the funds could dry up.

Pestronk agreed that agencies should apply for Economic
Injury Disaster Loans quickly.

While both SBA programs are available to small businesses,
Pestronk said the Paycheck Protection Program is likely more beneficial, as it
is forgivable, at least in part.

Sandra Lipkowitz, founder and owner of Gifted Travel Network
San Francisco affiliate We Make Travel Easy, said she has applied for an
Economic Injury Disaster Loan and has requested the $10,000 loan advance. She
has one full-time employee and three part-time ICs, so she will also apply for
the Paycheck Protection Program.

“Since I don’t know what will be approved, I am spreading my
net as wide as I can,” she said.

Lobasso confirmed that agencies can apply for both SBA
programs, but the funds must be used for different purposes. For example, if
the Economic Injury Disaster Loan is used for payroll for some employees in
April, the Paycheck Protection Program funds can’t be used for payroll in April
for those same employees.

What large agencies should do

The Economic Stabilization Fund is designed for companies
with more than 500 employees, ASTA said. On April 1, Kerby said the Society
expected further details on the program within the next week and encouraged
large agencies to stand by.

While the Cares Act’s $25 billion for airlines also includes
“ticket agents,” Pestronk said he believes there are several stipulations that
will make it difficult for travel agencies to qualify for the funds;
specifically, one that states credit must not be reasonably available and
another that suggests collateral is required in order to qualify for a loan or
loan guarantee. 

“For ASTA, there’s a lot of work to be done to squeeze into
this program for large agencies,” Pestronk said, but he also said he believes
it is possible.

Kerby agreed that travel agencies are very different
businesses than publicly traded airlines, so the Society has reached out to the
Department of the Treasury with an offer to help the department as it sets

“They have acknowledged our offer, and we’re going to see
how we can work with them to make sure that the rules are fair for our largest
members,” he said.

More relief on the horizon

On a March 30 webinar, ASTA’s Eben Peck, executive vice president for advocacy,
said there is already talk of another relief bill down the road.

“Not sure when, not sure how big, but folks are gearing up
for the next round,” he said. “We are certainly going to be heavily engaged in
that, as well.”

Kerby said he believes ASTA’s biggest advocacy efforts are
ahead of it, as the pandemic and the government’s effective shutdown of the
travel industry play out.

“We understand that this is an effort to save lives and slow
the infection rate. I get it,” he said. “But thousands of businesses in our
industry shouldn’t be given an ‘aw-shucks’ from their government or let the
market sort it out. We have to convince the government that more measures are
needed in order to get us back on our feet.”

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