Low-Interest Loans to Small and Mid-Sized Businesses

CARES Act – Low-Interest Loans to Small and Mid-Sized Businesses

Title IV of the CARES Act provides $500 billion in emergency relief in order to provide liquidity to eligible businesses, States, municipalities and Tribes related to losses incurred as a result of coronavirus.

What you need to know:

The Treasury is directed to use $454 billion (plus any unused amounts from the programs below) for loans, loan guarantees and other investments in support of the Federal Reserve’s lending facilities that support eligible businesses, states and municipalities. Businesses receiving these loans will be subject to restrictions on dividends, stock buybacks, and officer and employee compensation.

Separately, the Treasury is directed to seek the implementation of a Federal Reserve program or facility that provides financing to lenders that make direct loans to businesses and (to the extent practicable) non-profits with between 500 and 10,000 employees, with loans being subject to an annualized interest rate that is not higher than 2.0%.

The funds received are subject to the following restrictions:

The eligible business must retain at least 90% of their workforce, with full compensation and benefits, through September 30, 2020.
The eligible business will not outsource or offshore jobs for the term of the loan plus an additional 2 years.
The eligible business will not do away with existing collective bargaining agreements for the term of the loan plus an additional 2 years.
The recipient must remain neutral in any union organizing effort for the term of the loan.

This is not an EIDL or PPP loan.

What you should do:

Treasury has yet to announce details about implementation of this program, so stay tuned for further details.contact your banker to get in line if you think you might want to apply for one of these low-interest loans.

Other Loans: Airlines and National Security Businesses

The Secretary of the Treasury is authorized to make $46 billion in loans or loan guarantees to airline related businesses and businesses critical to maintaining national security. These loans are subject to a number of restrictions on use of the loan proceeds, stock buybacks, dividends, employment levels and executive pay. The Secretary of the Treasury is prohibited from issuing these loans or loan guarantees unless the eligible businesses provide warrants or equity (if publicly traded) or warrants, equity or senior debt (if not publicly traded).

April 2, 2020

Richards Rodriguez & Skeith