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Coronavirus Legal News

Tourism Industry to Benefit From Extended PPP

March 8, 2021

The extended Paycheck Protection Program (PPP) is of particular interest to those in the tourism industry because it addresses specific issues businesses like hotels, restaurants and bars are facing and have faced during the pandemic. Below is a summary of two recent articles that explain the loan program in more detail.

You can click here for the article written by Robert Smith/Arkansas Business or click here for the article written by Katherine Campbell/Northwest Arkansas Business Journal. Both appeared in print on Monday, March 8, 2021.


With the hospitality industry being disproportionately impacted by the economic devastation of the COVID-19 pandemic, some welcome relief may be available under the most recent federal stimulus package. The Paycheck Protection Program has been extended and expanded to provide more money to first-time borrowers and to give some existing borrowers more help, with provisions targeting owners and operators of hotels and restaurants.

The Economic Aid Act, which was signed into law at the end of last year, allocates an additional $284 billion for the program, opens the PPP loan program up to new types of borrowers, provides larger loans for those in the accommodation and food industries, and provides the opportunity for certain businesses to receive second PPP loans. Several of the bill’s provisions are of particular interest to the travel industry. The program also authorizes the Small Business Administration to guarantee loans through March 31.

A few key points about the PPP and the tourism industry:

  • The renewed PPP is available for both first-time borrowers and those borrowers that received a PPP loan in 2020. For first-time borrowers, loans are available in a maximum loan amount of the lesser of $10 million or 2.5 times average monthly payroll costs. “Second draw” loans are generally subject to many of the same terms of the program, but the maximum loan amount for a second draw loan is generally equal to the lesser of $2 million or 2.5 months of the borrower’s average monthly payroll costs.
  • The PPP is now open to entities that were not previously elgibile, including destination marketing organizations and 501(c)(6) organizations like chambers of commerce. These entities are now eligible for PPP loans as long as they meet certain requirements related to lobbying activities, including that they do not receive more than 15 percent of receipts from lobbying activities, lobbying activities do not comprise more than 15 percent of the total activities of the organization, and lobbying activity costs did not exceed $1 million during the most recent tax year. Additionally, these borrowers must employ 300 or fewer employees to be eligible.
  • Borrowers with a NAICS code beginning with 72 may receive some enhanced benefit under the program. These codes include businesses providing customers with lodging, meals and beverages, meaning that hotels and restaurants are covered. These borrowers are eligible for second draw PPP loans provided they have no more than 300 employees per physical location and generally experienced lost revenue in any calendar quarter in 2020 of at least 25 percent when compared with the comparable quarter in 2019.
  • Second draw loans to borrowers in the hospitality industry are more attractive because the maximum loan size is the lesser of 3.5 months of the borrower’s average monthly payroll costs or $2 million. The cap on total loans to a “corporate group” remains $20 million. A corporate group is defined as borrowers that are majority owned, directly or indirectly, by a common parent entity. Importantly, this limitation applies although the SBA’s general affiliation rules are waived in determining PPP eligibility.
  • For all borrowers, the documentation required to substantiate an applicant’s payroll cost calculations is generally the same as was required for first draw PPP loans. However, no additional documentation to substantiate payroll costs will be required if the borrower used calendar year 2019 figures to determine its first draw PPP loan amount, used calendar year 2019 figures to determine its second draw PPP loan amount (instead of calendar year 2020), and the lender for the applicant’s second draw PPP loan is the same as the lender that made the first draw PPP loan. For second draw PPP loans with a principal amount greater than $150,000, the applicant must also submit documentation showing that the applicant experienced a revenue reduction of 25 percent or greater in 2020 compared with 2019.
  • The stimulus bill expands the qualifying expenses for which employers may use PPP loan funds, including payments for software and other human resources and accounting needs and expenditures businesses have made to purchase personal protective equipment for employees and other expenditures made to comply with State Health Department, CDC, and OSHA guidelines related to COVID-19 protections.

Robert T. Smith heads the Finance & Commercial Transactions Practice Group at Friday Eldredge & Clark of Little Rock and serves on the firm’s management committee. His practice focuses on representing companies and financial institutions in general business, transactional, securities and regulatory matters.

Katherine C. Campbell is an associate in the Litigation Practice Group at Friday, Eldredge & Clark and practices in the Rogers office. She serves as litigation counsel for individuals and businesses in complex business and commercial disputes including employment claims, collective action wage and hour claims, and breach of contract matters.

Disclaimer: The information included here is provided for general informational purposes only and should not be a substitute for legal advice nor is it intended to be a substitute for legal counsel. For more information or if you have further questions, please contact one of our Attorneys.

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