Main Street Lending Program

The Main Street Lending Program will provide support for businesses that were in good financial standing before the crisis and employ up to 10,000 workers or have revenues of less than $2.5 billion. The program will provide 4-year loans with payments deferred for one year. Firms that have taken advantage of the PPP may also take out Main Street loans. See: https://www.federalreserve.gov/monetarypolicy/mainstreetlending.htm.

Small Business Administration Economic Injury Disaster Loan (EIDL)

  1. The SBA is offering low-interest federal disaster loans to provide working capital to small businesses suffering substantial economic injury as a result of COVID-19. The maximum loan amount is $2 million, and the interest rate is 3.75% for small businesses. The loan proceeds may be used to pay fixed debts, payroll, accounts payable, and other bills that cannot be paid because of the disaster’s impact. Borrowers are also eligible to apply for a loan advance of $1,000 per employee, up to $10,000. See: https://www.sba.gov/disaster-assistance/coronavirus-covid-19. NOTE: EIDL loan applications are still being accepted by the SBA from qualified small businesses.
  2. NEW: EIDL Advances: The Economic Aid Act repealed the EIDL advance deduction under the CARES Act, which previously required borrowers to deduct the amount of EIDL advances from PPP loan forgiveness amounts. Borrowers that already took such a deduction in their forgiveness application will be notified by their PPP lender when the SBA has made a reconciliation payment for the deduction (together with interest) and will have their loans reamortized or paid in full (as applicable), or if the amount remitted to the applicable lender by the SBA exceeds the remaining principal balance of the PPP loan, the PPP lender will remit the excess amount to the borrower.

Payroll Protection Program (PPP)

  1. The Paycheck Protection Program (PPP) provides loans that small businesses may use to help cover payroll costs and other specified operating expenses. The U.S. Small Business Administration (SBA) reopened the PPP on January 11, 2021, and will keep it open through March 31, 2021. As of January 11, 2021, eligible businesses and organizations can apply for an initial PPP loan (or “first draw loan”), and as of January 13, 2021, select eligible entities that previously received a PPP loan can apply for a “second draw” PPP loan. The revised PPP also permits certain borrowers to increase their initial loan amount. See: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program.
  2. NEW: Permitted Use: In addition to existing permitted uses of PPP loans – payroll costs, rent, mortgage, utilities – the Economic Aid Act expands the permitted use of PPP loans to cover certain operations expenditures, as well as costs associated with property damage, supplier disruptions, and worker protection expenditures. Note that payroll expenses now also include group life, disability, vision, or dental insurance benefits. These changes apply to PPP loans made both before and after December 27, 2020.
  3. NEW: Forgiveness: The Economic Aid Act further revises the loan forgiveness procedures as follows, which revisions apply retroactively to prior PPP loans:
    1. (a) Covered Period: A PPP borrower can now decide the length of its forgiveness-covered period, which may be between 8 and 24 weeks after the date of the loan disbursement.
    2. (b) Simplified Forgiveness Application: For PPP loan amounts of $150,000 or below, the Economic Aid Act has provided for a simplified forgiveness application process under which the borrower signs and submits a certification to the lender meeting the following requirements: (i) the application cannot be more than one page in length; (ii) the borrower need only provide a description of the number of employees the borrower was able to retain because of the loan, estimated loan amount spent on payroll costs, and total loan value; and (iii) the borrower must attest that it has accurately provided the certification, complied with SBA requirements, and retained proper records, as more specifically set forth in the Economic Aid Act.

CARES Act and Economic Aid Act

  1. The CARES Act established 2 loan programs for U.S. businesses: (1) the Coronavirus Economic Stabilization Act of 2020, which creates loan programs to be directed by the United States Department of the Treasury and (2) the Keeping American Workers Paid and Employed Act, which creates the Paycheck Protection Program (PPP). The U.S. Department of the Treasury’s website contains the most up-to-date information on these two programs. See: https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses.
  2. NEW: The Consolidated Appropriations Act, includes a second round of stimulus funding in the form of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “Economic Aid Act”). Among many other measures, the Economic Aid Act further extends and revises the PPP program.
  3. Additional information can be found at the CARES Act Resource Center developed by Morrison & Foerster LLP:
    1. CARES Act Resource Center: https://www.mofo.com/special-content/coronavirus/cares-act.html.
    2. Overview of loan programs: https://www.mofo.com/resources/insights/200327-overview-cares-act-loan-programs.html.
    3. CARES Act FAQ: https://www.mofo.com/resources/insights/200327-faq-coronavirus-economic-stabilization-act-cesa.html.
    4. Overview of Economic Aid Act: https://govcon.mofo.com/small-business/the-economic-aid-act-and-a-second-round-of-ppp-loans/.

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