SBA Revises Guidelines for Small Gaming Businesses

On April 24, 2020, the Small Business Administration (“SBA”) issued revised and updated guidelines to allow certain gaming businesses to benefit from the new Paycheck Protection Program (“PPP”) created under Title II of the CARES Act. This is a reversal of the SBA’s longstanding regulations that made most gaming businesses ineligible for any SBA loans.

An SBA regulation from 1954 excluded businesses from receiving SBA loans if they generated more than one-third of their annual gross revenue from lawful gaming activities. Labeled as so-called “bad boys,” gaming entities were grouped together with other industries as ineligible for any SBA loans. However, gaming has become embraced by states, which not only benefit from gaming taxes but significant job creation. The Nevada Resort Association, for example, reported that the leisure and hospitality industry employs one in four employees in Nevada with an economic output of $68 billion, and gaming taxes are second as a percentage of Nevada’s annual budget.

Given the gaming industry’s significant economic contribution in the U.S. and the impact that the novel coronavirus (COVID-19) has had on the industry, advocates argued that commercial and tribal gaming businesses (and their employees) should be able to benefit from the PPP. Indeed, almost no gaming business has been left untouched by the virus, and these companies are struggling to maintain their payroll given the near complete absence in incoming revenues.

SBA’s new guidance rectifies this past egregiousness and makes the PPP available to gaming businesses that would otherwise qualify. The new guidelines state, in pertinent part, that:

A business that is otherwise eligible for a PPP Loan is not rendered ineligible due to its receipt of legal gaming revenues, and 13 CFR 120.110(g) is inapplicable to PPP loans. Businesses that received illegal gaming revenue remain categorically ineligible. On further consideration, the Administrator, in consultation with the Secretary, believes this approach is more consistent with the policy aim of making PPP loans available to a broad segment of U.S. businesses.