Contributed by Miller, Butler, Schneider, Pawlik, & Rozzell, PLLC
The extended Paycheck Protection Program (PPP), one of the most recent federal stimulus packages, may provide much needed relief to business such as hotels, bars, and restaurants which have been hit disproportionately hard by the pandemic. Due to the pandemic, tourism tax revenue in Arkansas for January to June of 2020 was down 30.4% compared with the same period in 2019. Medium-sized businesses and small “mom-and-pop” businesses have felt the strain of the pandemic the hardest and many have struggled to stay afloat, a serious problem considering that 95% of all accommodation and food service employment in the US is in small and medium-sized businesses.
During the first round of the program, just 8% of the hospitality sector received loans, according to data from the US Small Business Association. The most recent round, which was signed into law at the end of 2020, allocates an additional $284 billion for the program, opens the PPP loan program up to more kinds of borrowers, and provides larger loans for those in the accommodation and food industries. It also allows certain businesses, including those providing customers with lodging, meals, and beverages, to receive second PPP loans so long as they have no more than 300 employees per location and generally experienced lost revenue of at least 25% in any calendar quarter of 2020. Additionally, business owners can now obtain forgiveness for money spent on operations costs, property damage not covered by business insurance and incurred in 2020, supplier costs, and costs incurred for personal protective equipment. Capital improvements made in order to comply with social distancing requirements are also covered. However, 60% of the loan must be spent on payroll-related costs in order to obtain loan forgiveness.