$377 Billion in Liquidity for Hotels, VRs and Other Small Businesses

On March 26th the U.S. House of Representatives passed a $2 trillion coronavirus response bill – the largest rescue package in American history – to alleviate some of the pain associated with the latest downturn.

The Coronavirus Aid, Relief, and Economic Security Act, or, the CARES Act, includes financial and stimulus provisions broadly across the U.S. economy. 

For hotels and VRs in particular, relief is found in provisions targeting Small Businesses. While the Act defines these at businesses with 500 employees or less (determined on a 12 month average), special eligibility consideration is made for any business with an NAICS code beginning with “72”. This includes, Hotels and Motels, Bed-and-Breakfast Inns, and Recreational and Vacation Camps. These industry companies are eligible, assuming they have less than 500 employees per location.

The main feature for hotels and VRs is the Paycheck Protection Program, a $350 billion forgivable loan program allowing loans of up to $10 million per business for payroll. 

Hotels and VR borrowers can also use the PPP loans to pay for rent, mortgages, utilities or existing debt – provided workers stay employed through the end of June. Loan proceeds used in the eight week period from when a loan originates are eligible for forgiveness or payback reduction provided basic eligibility requirements are met. Loan funds cannot be used to pay salaries over $100,000. 

PPP loans can be up to 250% of a business’s average monthly payroll over the last 12 months; not to exceed $10 million. As well, payments of principal, interest and fees that are non-forgivable will be deferred for at least six months. Loans interest rates are capped at 4%.

To disincentivize layoffs, forgivable loan amounts will be reduced by the percentage of full-time equivalent employees that are eliminated during the eight weeks after loan funding.  

Unlike SBA 7(a) loans, no personal guarantees are required to receive funds. No collateral obligations are required, either. Hotels and VRs must simply certify that the loan is necessary due to the current economic climate.  

According to NPR, other CARE Act provisions include:

• Emergency grants: $10 billion for grants of up to $10,000 to provide emergency funds for small businesses to cover immediate operating costs.

• Relief for existing loans: $17 billion to cover six months of payments for small businesses already using SBA credit. 

There are also changes to expense and deduction rules meant to make it easier for small businesses to keep employees on the payroll and stay open in the near-term.

For businesses with pre-existing SBA loans, the SBA will pay the principal, interest and associated fees on certain pre-existing loans for six months.

For hotels and VRs, the Act is a much needed liquidity boost. Today, travel bans and social-distancing measures have driven occupancy levels industry-wide into the single digits. However, as The American Hotel and Lodging Association (AH&LA) President/CEO Chip Rogers shares, for many owners, “…the formula for determining maximum loans still does not provide enough liquidity.” 

The AH&LA, along with the AAHOA and other industry advocates are lobbying congress to pass subsequent loan and grant program legislation to better serve the industry.  

For hotels and VRs interested in these relief measures, the SBA is required to issue application process guidance within 15 days of the Act’s enactment. Loans will be provided through banks, credit unions, and other lenders, and will be guaranteed by the SBA. As of now, the deadline to apply for paycheck protection loans is June 30, 2020.


This article provides an overview of a developing situation. It is not intended to be, and should not be construed as, legal advice for any particular hotel, vacation rental or other business situation.