Resorts can borrow under CARES ACT

By W. John Funk, Gallagher, Callahan & Gartrell, P.C., Concord, NH

The newly-enacted federal law called the CARES Act provides the following borrowing opportunity for most legacy resorts:

4. Resorts that have fewer than 500 employees are eligible for a Small Business Administration (SBA) guaranteed loan under the Act (“covered loan”).
5. The period covered by the loan is from February 15, 2020 to June 30, 2020.
6. The loan amount for which resorts are eligible is the lesser of (i) the product of the monthly average payroll for the last year prior to making the loan times 2.5 or (ii) $10 million.
7. The loans may be used for payroll (wages, salaries, healthcare costs, retirement costs, taxes, and related costs), commissions, interest on mortgage loan obligations and other debts, rents, and utilities.
8. The term “employee” includes full-time employees, part-time employees, or individuals employed on another basis.
9. A lender approved by the SBA to make loans is authorized to make and approve covered loans.
10. A resort must make certifications to get the covered loan: uncertainty of economic conditions require support, acknowledge that the funds will be used to retain workers and pay permitted expenses, and no other applications pending or loans received for the same purpose.
11. The SBA waives fees for the program.
12. The interest rate can be no more than four percent.
13. For the covered period, each resort will be considered to be impacted by COVID-19 and payment of principal, interest and fees is deferred for at least six months, but not more than one year.
14. No personal guarantees or collateral are required.
15. At the end of the covered period, the loan will be forgiven to the extent the resort demonstrates that the proceeds are used for payment of payroll, interest on mortgage obligations (but not other debts), rent, and utilities.  The amount of forgiveness will be reduced by the quotient obtained by dividing the average number of full-time equivalent employees per month by, at the election of the borrower, either the number of full-time equivalent employees employed from February 15 through June 30, 2019; or January 1, 2020, through February 29, 2020. The number is calculated with reference to each pay period within a month.  The amount of forgiveness will be further reduced by any amount in excess of 25 percent of the salary of an employee (who receives less than $100,000) is reduced during the covered period from which the employee was previously paid during the last full quarter prior to the covered period.