After facing criticism that it was preventing small-business owners from accessing vital funds from the Small Business Administration’s Paycheck Protection Program, the Ashford Group of Companies announced that all of its companies will return any money received under the program. Companies are able to repay the loan in full by May 7 with no penalty.
The companies, which include Ashford, Ashford Hospitality Trust and Braemar Hotels & Resorts, said the move was made because of the SBA’s recently changed rules and inconsistent federal guidance that put the companies at compliance risk.
“Some media and members of Congress have falsely implied that Ashford accessed ‘loopholes’ in the [Coronavirus Aid, Relief and Economic Security] Act to qualify for the PPP funds,” according to a statement from the company. “In fact, Congress designed the PPP to specifically allow companies that own multiple hotel properties to obtain separate loans for each property as a means to prevent the economic collapse of the hospitality industry that is now occurring.”
The statement goes on to say that Ashford management had no intention of crowding out any business from gaining equal access to the PPP funds, and could not have known that congressional appropriations for the program would be insufficient to cover the needs of all other businesses in the nation that have suffered similar harm.
The SBA clarified its PPP requirements at the end of April, saying that borrowers must certify in good faith that their PPP loan request is necessary, “taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.”
The guidance went on to say that it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.
Additional SBA guidance clarifies that businesses that are part of a single corporate group are not eligible for PPP loans, saying that businesses are part of a single corporate group if they are majority owned, directly or indirectly, by a common parent.
“While we believed then and continue to believe today that we qualify for PPP loans based on the legislation and rule-making in place at the time our applications were submitted, continuous SBA rule changes and evolving opinions by administration officials have led us to conclude that we may no longer qualify,” Ashford’s statement went on to say.
Ashford Hospitality Trust is a real estate investment trust focused on investing predominantly in upper-upscale, full-service hotels. It has 117 properties with nearly 25,000 guestrooms in its portfolio. Braemar Hotels & Resorts is a real estate investment trust focused on investing in luxury hotels and resorts. It has 13 properties with more than 3,000 guestrooms in its portfolio.
Almost 320 loans were received by public companies totaling $1.12 billion as of May 1, and 29 had been returned worth $183 million, according to FactSquared.
The SBA’s PPP is on round two, having given out $349 billion in forgivable loans to small businesses at the beginning of April to pay their employees during the COVID-19 crisis, with an additional $310 billion added to the pot at the end of the month.
Sixty-one percent of U.S. hotels, approximately about 33,000 total—are defined as small businesses, according to the American Hotel & Lodging Association.
According to a statement from U.S. Small Business Administration Administrator Jovita Carranza and U.S. Secretary of the Treasury Steven T. Mnuchin, the SBA has processed more than 3.8 million loans for more than half a trillion dollars of economic support since the PPP was launched on April 3.