Help for Hospitality Industry Under the CARES Act
Last week the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law by President Trump in response to COVID-19. The CARES Act is a significant piece of legislation, providing $2 trillion worth of critical relief to consumers and businesses. As part of the CARES Act, many hotel and food service operators may be eligible for a piece of $350 billion in forgivable loans fully guaranteed by the Small Business Administration (“SBA”).
The CARES Act expands the SBA 7(a) loan program, creating the Paycheck Protection Program (“PPP”), to help eligible businesses pay certain operational costs. Loan amounts may be forgiven under the expanded loan program, subject to certain conditions. The PPP is available to small businesses that employ less than 500 employees. The SBA affiliation rules generally aggregate a loan applicant together with all of its affiliates when determining the number of employees.
Hotels, restaurants and other hospitality businesses that employ no more than 500 employees per physical location, however, are eligible for the PPP, if the business falls under the “accommodation and food services” sector with a North American Industry Classification System (“NAICS”) code beginning with 72. In addition, the affiliation rules are waived for these businesses, including any franchise business assigned a franchise identifier code by the administration.
As a result, a hotel franchisee or restaurant operator will be eligible to apply for a loan under the PPP without regard to the number of locations owned, as long as each location is held in a separate business entity, has less than 500 employees, and without regard to any other businesses under common control with the franchisee or operator.
The industries with NAICS codes beginning with 72 are as follows:
We will continue to monitor developments and share updates related to the CARES Act and the PPP. If you have further questions, please contact us.
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