Last weekend, the U.S. Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which, at $2 trillion, is the biggest piece of legislation ever passed by the U.S. Congress.
According to ASTA CEO and president Zane Kerby, the CARES Act “fashions a lifeline to a seemingly endless number of industries and individuals impacted by the economic freefall impacted by the coronavirus.”
While there are multiple options in the CARES Act for advisors and agency owners to get relief, they all depend on the size of the agency and employee status.
What does the CARES Act say about travel advisors?
Included in the CARES Act is an Emergency Stabilization Fund, a $500 billion pool of funds for the Treasury, along with the Federal Reserve, to make loan and loan guarantees for larger companies. Of that $500 billion, $29 billion is set aside for airlines, aircraft repair stations, and “ticket agents,” which is the statutory term for travel advisors.
Getting that mention in the act is a big win for ASTA, ASTA’s executive vice president of advocacy Eben Peck said on Monday.
The mention “will ensure our members are close to the front of the line when Treasuries start handing out these loans and loan guarantees,” he said. “Having ‘ticket agents’ named in the bill for this program is really a great development and a huge win.”
What can smaller agencies do to get relief now?
Businesses with fewer than 500 employees, along with ICs, who have suffered a “substantial economic injury” because of COVID-19, can apply for loans up to $2 million to provide working capital for regular business expenses including rent, payroll, lease, utilities, and more, under the SBA Economic Injury Disaster Loan Program.
The SBA’s program was in place prior to the COVID-19 crisis and the passing of the CARES Act. The funding for the program was increased on March 6 and as of March 13, all 50 states are categorized as disaster areas, which allows for all businesses in U.S. states and territories to apply.
“That’s another route that our members can take to get relief,” Peck said.
The interest rate for those loans is 3.75% and the maximum term is 30 years. Payments can be deferred for up to one year. According to ASTA’s senior vice president and general counsel Peter Lobasso, the SBA’s website, which had some technical problems because of the volume of people accessing it recently, should be back up and running this week.
There is $249 billion in Paycheck Protection Program Loans, which is separate from the $500 billion Emergency Stabilization Fund. Those loans will be administered by the SBA. That fund is open to any business with 500 employees or fewer and is designed to help serve as a partial revenue replacement program for deeply affected businesses.
Borrowers under the Protection Program loans would be eligible for loan forgiveness as long as they maintain their pre-crisis level of full time equivalent employees (or if the employees have been re-hired by June 30).
What about the larger agencies?
Employers with 500 or more employees will not have access to the new SBA Loan program, so it’s important to know how else they can apply for financial relief.
As part of the CARES Act’s $500 billion Emergency Stabilization Fund, $454 billion in loans and loan guarantees have been earmarked for businesses who have not received adequate relief in form of other loans. This is in addition to the amount earmarked for “airline ticketing agents” in the CARES Act.
The loans are approved at pre-COVID-19 interest rates with terms of up to 5 years. Application procedures have not been published yet by the Treasury, but are expected soon.
What kind of relief is available for independent contractors?
If you are an independent contractor, unemployment benefits, that were typically only available to 1099 employees, are now available to you. The programs are funded by employee and employer contributions—W2 employees contribute via a payroll tax deduction, while employers contribute based on the total amount of their payroll—so ICs are generally not included in this relief. The CARES Act changes that.
The opening of unemployment benefits offer “immediate and far-reaching relief to thousands of self-employed and IC travel advisors,” ASTA CEO and president Zane Kerby said on Monday. It offers ICs the same relief that W2 employees typically receive.
While the processes vary from state-to-state, the general rule is now wage relief, plus an additional $600 per week, will now be available to ICs for up to 39 weeks. The IC will need to certify that they are willing and available to work but are unable to due to COVID-19 impact. The amount of benefit is determined based on the state’s calculation using net income from the prior tax year.
Advisors who want to apply for unemployment relief can do so by contacting their state’s unemployment office. The Department of Labor’s Career One Stop website has a database of each state’s unemployment office site here.
According to ASTA’s senior vice president and general counsel Peter Lobasso, there may be some delay in the process as the states figure out how to handle unemployment claims for ICs.
Lobasso stressed on Monday that it’s important to correctly state your status as an IC when applying—any claims with errors can cost an advisor time, especially with the volume of applications, and mistakenly stating that you were a W2 employees will create “a real headache for those agencies,” including exposing an agency to a reclassification audit.
When can I start to apply?
Applications for the SBA Disaster Loan program, along with state unemployment applications, are already open.
The Department of Labor’s Career One Stop website has a database of each state’s unemployment office site here while SBA Disaster Loan applications can be found here on the SBA website.
Applications for the U.S. Treasury’s Paycheck Protection Program are now open and available on the Treasury website. Thousands of banks are participating in the program, and applicants can find a local Small Business Development Center to better target which institution is best for them here.
Applications for the $29 billion that is set aside for airlines, aircraft repair stations, and “ticket agents,” have not yet open. Neither have applications for the $454 billion earmarked for everyone else.
What is next for ASTA?
ASTA is currently targeting credit card chargebacks, which have increased amidst the COVID-19 pandemic.
ASTA said on Monday that it will also continue to plan for round four of the stimulus, the next bill that Congress may look to as the COVID-19 continues to impact the U.S. economy.
“We’re not sure when, we’re not sure how big, but folks are gearing up for the next round,” Peck said. “We are certainly going to be heavily engaged in that as well.”
“Round four will soon become a major focus of ours.”