Improving Access to Capital and Credit for Small Businesses

The Issue:

In the past three years, hoteliers have experienced the lowest annual changes in net operating income (NOI) in 72 years. A study conducted by PKF Consulting and Hospitality Research revealed that the largest single year decline in NOI occurred in 2009 at below thirty-five percent (35%); and the cumulative three year NOI (between 2009, 2008, and 2007) declined to more than forty-five percent (45%).   

As small businesses within the hospitality industry, such a dramatic decline in the hotel occupancy rates and the NOI makes it difficult for hoteliers to meet their monthly debt service obligations.  Further, many hotels have been forced to downsize or even close their doors.

The Impact:

In general, we believe that Congress can improve the SBA loan programs by:

  • Increasing the maximum SBA loan size to $5 million, which will directly improve small businesses’ access to capital;
  • Increasing the SBA guarantees to ninety percent (90%) for maximum loans, which will greatly expand loan availability because banks will be more willing to lend to small businesses;
  • Waiving borrower loan fees;
  • Offering tax incentives to encourage small businesses to add and keep employees; and
  • Mobilizing the remaining Troubled Asset Relief Program (TARP) funds to facilitate lending to the small business community.

The Legislative Solution:

Accordingly, Congress has taken important steps to address the current lending crisis that has made it difficult for hoteliers and small businesses to secure adequate financing or credit for their operations. Both the U.S. House and Senate introduced legislation that proposes to improve small businesses’ access to capital and credit. The Senate Bill (S. 2869) and the House Bill (H.R. 3854) offer various enhancements to the Small Business Administration Loan Program (SBA), and extends certain Stimulus Act benefits.  These enhancements and benefits include, but are not limited to: increases in the loan limits, higher guarantees, reduction of loan fees, and low interest refinancing.

AAHOA strongly supports legislation designed to help small businesses during this current credit crisis.