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CARES Act Main Street Loan Program for Hotels


July 2, 2020

This program is still being finalized and the information presented in the form of Questions/Answers below may change within the coming weeks. There are 3 programs of which MSNFL may be more relevant for the hoteliers and the information below refers to this program. In the future updates, the 2nd program which is MSPLF will be examined as well.

Question 1: Where to apply for these loans? From the banks who have participated with the program. However, since this is a sophisticated program and requires full underwriting and yet the details of the program has not been cleared and finalized by the Treasury, only 100 banks have signed up to participate so far. Scientific Capital may act as intermediary to arrange these loans for the borrowers

Question 2: Is the program open to apply? The program opened to lenders to register in mid May but the lenders are still trying to determine the underwriting process. Unlike the PPP that didn’t require any credit and financial analysis, the Main Street loan program is going to require full underwriting based on standard underwriting processes of the lender including if necessary appraisals and other third party reports. We will update this page when the lenders start accepting applications

Question 3: When does the program end? September 30, 2020 and so this date may be extended

Question 4: Which hotels are qualified? Only those in operation prior to March 13, 2020

Question 5: Would like PPP program, foreigners qualify for this loan? No 51% of the hotel must be owned by US entities or persons

Question 6: Can a borrower who obtained PPP and EIDL apply for Main Street program? Yes

Question 7: Is the loan forgivable? No

Question 8: How many points the bank may charge? Up to 1%

Question 9: When is the term of the loan? 5 years

Question 10: How do I make payments? No principal payments for 2 years, then 15% of principal at the end of the 3rd year, 15% at the end of the 4th year, and 70% at the end of the 5th year. Interest is deferred for one year only and is compounded into the loan as principal

Question 11: What is the interest rate? 1 or 3 month LIBOR + 3% and adjustable (if for example LIBOR is 0.3% when the loan funds, then the start rate will be 3.3% adjustable)

Question 12: Is there a Prepay? No but the borrower cannot pay off the other loans earlier than this loan unless there is a hard maturity on those loans at the time of obtaining the Main Street loan

Question 13: Does the Main Street loan subordinate to an existing mortgage? All loans other than the mortgage has to be at the same position or have to subordinate to the Main Street loan. This means the mortgage lender has to allow this loan to subordinate to their loan and all other lenders have to agree to subordinate to or to pari-passu with (in the same position) the Main Street loan

Question 14: Does payment history on other loans matter? As of December 31, 2019, all loans should have been in good standing

Question 15: Can one file bankruptcy after receiving Main Street loans? No as the borrower must certify that it will be in sound financial standing within 90 days after the funding of the loan. In other words, the borrower cannot file for bankruptcy for at least 90 days

Question 16: Is there a payroll requirement? Yes, the borrower must make reasonable efforts to maintain the payroll and to retain employees while the loan has outstanding balance. This is not like the PPP loan where there was a hard requirement on maintaining the number of employees and the payroll amount

Question 17: How to calculate the loan amount and is there a minimum loan? For all three programs, the minimum loan is $250,000. The following is an example on how to calculate the Main Street loan amount for a hotel under the MSFLF program:

    • Calculate the EBITDA: NOI on 2019 tax return (or P&L) + Interest + amortization + depreciation (Before income taxes)
    • Multiply EBITDA by 4 and call it “4-Times-EBITDA”
    • Calculate your total debts:  maximum credit line on your credit cards + lease balances + seller carry back loans + maximum credit line on your Lines of Credits + Mortgages +  EIDL loan + Unforgiven portion of the PPP loan + any other debt and call it “TOTAL DEBT”
    • Calculate your Mann Street loan amount :  4-Times-EBITDA – TOTAL DEBT and call it “MS LOAN AMOUNT”
      • If MS LOAN AMOUNT is less than 250,000 you are out of luck and do not qualify
      • If MS LOAN AMOUNT is 250,000 or higher, then this is your qualified loan amount for the Main Street MSNFL program


EBITDA: Lets say after adding back Amortization, Depreciation, and Interest to the NOI, EBITDA is $700,000

4-Times-EBITDA = $2,800,000 which is calculated by multiplying EBITDA of $700,000 by 4

TOTAL DEBT: Add up all the hotel loans as explained above. Depending on the TOTAL DEBT there may be 3 cases as demonstrated in the hypothetical examples below:

Case 1: The TOTAL DEBT adds up to $2,550,000: MS LOAN AMOUNT = $2,800,000 – $2,550,000 = $250,000 which is the minimum loan amount for this program and your hotel qualifies for $250,000 Main Street loan. In this example, if your TOTAL DEBT is even one dollar larger than $2,550,000, then  your MS LOAN AMOUNT = $2,800,000 – $2,550,001 which is $249,999. Since this is under the minimum required $250,000, the hotel will not be qualified for a Main Street loan

Case 2: The TOTAL DEBT adds up to say $5,000,000 : MS LOAN AMOUNT = $2,800,000 – $5,000,000 = (2,200,000) which means the mortgage is too high and the hotel does not qualify  for a Main Street loan

Case 3: The TOTAL DEBT adds up to say $1,900,000: MS LOAN AMOUNT = $2,800,000 – $1,900,000 = $700,000 which means the hotel qualifies for a Main Street loan of $700,000

Again notice that the numbers above were radomly selected to demonstrate an example. You may read more detail on the terms of this program on the Treasury website


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