Hoteliers Dodge SBA Loan Reduction Bullet

NATIONAL REPORT— When the nation’s smaller hotel owners/developers turn to Washington D.C. for seed money later this year they may find the cupboard bare. At presstime, however, it looked like would-be borrowers had somewhat dodged the bullet— at least through the month of January— as the Small Business Administration (SBA) noted it would be reinstating its 7(a) loan program suspended Jan. 6 in the wake of a move by the U.S. House of Representatives to cut that agency’s budget. At that time, it was noted that all 7(a) loan activity by the SBA would be suspended, at least until the Senate reconvenes and the Congress can get a better handle on the extent and state of appropriations to the SBA in fiscal 2004. Initially, the House trimmed the SBA’s fiscal 2004 budget when it mandated the agency would receive only $718.3 million in federal funding this fiscal year, which began Oct. 1, 2003, under terms of the recently passed omnibus appropriations bill. Last year, Congress appropriated $731.6 million for the SBA. As spelled out, this reduction would have specifically done away with 7(a) loan dollars historically available to small businesses. Without a doubt, the nation’s smaller hoteliers expected to bear the brunt of this budgetary shortfall and— though there has been something of a reprieve delivered— there is still reason to believe industry borrowers will suffer. Not only is it possible lending may have to be suspended again (before Jan. 31) if loan demand remains unexpectedly high, but even those who are successful in tapping these governmental coffers will find the ceiling on such funds lowered from $2 million to $750,000. One of those quick to go to bat for “the little guy” was US Franchise Systems Chairman/CEO Mike Leven, addressing the 7(a) loan situation from the vantage point of heading up three separate lodging brands. “Anything making financing more difficult will necessarily restrict development,” Leven said. Accordingly, that reality presents a concern to franchisors as well as franchisees, as— in his case— he said he has seen “a lot of Microtels [in particular]taking advantage of SBA loan programs, both the 7(a) and the 504 offerings.” Moreover, Leven said that when a situation like this does arise, “all companies in the limited-service sector have historically stood shoulder-to-shoulder” to combat the situation. Taking this through-the-ranks reaction a step further, Leven said some relief to capital-constricted hotel owners/developers could even be forthcoming from the hotel companies themselves. “We have kicked in small amounts of money, primarily to proven franchisees,” he said. Another top franchisor justifiably weighing in on the situation was Cendant Corp. Alluding to the fact so many of the organization’s lodging brands play into the economy and midscale segment of the hotel arena, Cendant Hotel Group Chairman/CEO Steve Rudnitsky agreed any cutback in SBA loan dollars could directly impact the hotel company’s customer base of hotel owners. “[Many of our] franchisees fit into this category. This could impact our franchisees,” Rudnitsky said. “We like to be the conduit to SBA lenders,” he said, adding that Cendant would contact preferred suppliers giving SBA loans on behalf of its franchisees. Rudnitsky also affirmed Cendant works very closely with industry associations— such as the American Hotel & Lodging Association (AH&LA) and the Asian American Hotel Owners Association (AAHOA)— and emphasized: “If there is a concerted effort to bring this issue to Washington to get more SBA funding, then Cendant would certainly participate.” In fact, Days Inn President/CEO Joseph Kane is the current secretary/treasurer of AH&LA, and approximately half of Cendant’s franchisees belong to AAHOA, according to Rudnitsky. Combining both the hotel-owner and hotel-association perspectives was BHG Hotels President/CEO Buggsi Patel, a past chairman of AAHOA and current president of the International Operators Council f