America’s hospitality industry has always been a key driver for the nation’s success. When people have the ability to eat, drink, sleep, and be entertained in a variety of locations, the economy benefits and millions of jobs are created. On top of that, happiness actually improves around the country due to the positive mental health effects of travel and seeking new experiences.
But the personal nature of businesses within the hospitality industry has left them most vulnerable to the horrendous impacts of the COVID-19 pandemic. Whether a business is closed due to a public health mandate or a drop in customer demand, the short-term effects are usually the same: revenue plummets and jobs are lost.
“By most measures, the workers hardest hit by the pandemic shutdowns were those in the leisure and hospitality sector, which includes arts, entertainment, recreation, accommodation, and food services,” notes economist Kathryn A. Edwards. “Back in February, there were 16.8 million of these jobs; by April, there were only 8.5 million. Among all of the people working in leisure and hospitality in March, 47% were not working at all in April. Leisure and hospitality jobs are also some of the lowest paid out there […] Further, these jobs—still affected by government social distancing regulations—are not all likely to come back before the pandemic truly ends.”
These observations from Edwards were made in September 2020, and the negative trends have only continued since then. When the Bureau of Labor Statistics released its most recent jobs report, we learned that nearly 500,000 jobs were lost from the leisure and hospitality industries in December alone. The food and drink industry was most severely impacted, with 372,000 workers losing their jobs.
If there ever were a time for good news, it’s now. And Congress helped to deliver that good news by recently passing a $900 billion in coronavirus relief package. Included in the funding is $284 billion for Paycheck Protection Program (PPP) loans. These lifesaving loans max out at $2 million and are intended to cover 2.5 months of your payroll. Better yet, the loan is potentially-forgivable when you put 60% or more of the money toward payroll and any remaining funds are spent on eligible costs.
Any business applying for its first PPP loan will get priority placement at the front of the line. For those that received a PPP loan during the first round in 2020, there’s still a good chance of getting approved again. These repeat applicants will just need to meet a separate set of requirements, such as verifying that their revenue has dropped at least 25% in 2021.
As if the announcement of round 2 isn’t good enough, there are other factors of these new PPP loans that are getting positive attention.
“One of my favorite aspects of this new bill fixes something that caused undue heartache and problems in the first round,” explains Brock Blake, Lendio’s CEO and co-founder of Lendio. “Of the $285 billion set aside for PPP, $12 billion is designated specifically for minority-owned businesses and businesses in underserved communities. During the first rounds of PPP, it is well documented that many lenders prioritized large loans due to the program’s reimbursement economics. In this round, Congress increased the reimbursement on loans less than $50,000 so that lenders have incentive to prioritize the smallest of small businesses. To me, this may be the most important change; I’m glad to see America’s underserved and smallest businesses finally receive the attention they need during these critical moments of survival.”
This focus on delivering PPP funds to the businesses most in need falls right in line with the Small Business Administration’s mission of serving entrepreneurs who need a helping hand. And it gives confidence to those who might’ve missed out on the first round of loans and now find themselves in an even more difficult situation as 2021 unfolds.
Many lenders are preparing application platforms that will allow you to seek a PPP loan for your business. For example, Lendio has created a preliminary online application that helps you navigate the process as quickly as possible. Lendio’s team of experts is also keeping close tabs on all updates from the SBA so they can ensure the application is completely up to date.
If you already went through the application process during the first round of PPP loans last year, you’ll find that many of the details are similar this time around. For those who are seeking their first PPP loan, it will be important to prepare as much as possible ahead of time. That way, you can navigate the application faster and with fewer hiccups.
Here’s a quick list of some things you’ll want to round up for your application:
Pay close attention to the application and follow each requirement with precision, as inaccurate submissions always result in delays or rejection. Be aware that even with the world’s most impressive application, there are reasons you might not qualify for a PPP loan. For example, if you have a felony on your record within the past 5 years, you won’t qualify. Same goes for anyone who has defaulted on an SBA loan in the past 7 years.
Even if you qualify for a PPP loan, it’s possible that your business will still need other sources of financing in order to survive the remainder of the pandemic. There are multiple routes you can take for that financing, some of which are much easier to qualify for. If you find yourself in additional need of funding, consider these 10 popular options:
Whether you receive financial support from a PPP loan, equipment financing, a term loan, or something else entirely, just know that there are lots of people out there who are standing by to help you. Feel free to reach out to Lendio’s team if you have specific questions about our preliminary online application. You can also get resources from your local SCORE office or Small Business Development Center.