In response to the unprecedented disruption caused by the COVID-19 pandemic and public health efforts to fight the virus, federal and state legislators have created numerous stimulus and relief packages to stabilize the national economy and provide support to those affected. The most recent and largest of these packages was the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020.
For businesses, the CARES Act creates several programs directed at addressing liquidity needs stemming from losses suffered as a result of this pandemic. These programs include the expansion of existing loan programs under Sections 7(a) and 7(b) of the Small Business Act, and the appropriation of funds to the U.S. Treasury Federal Reserve Fund to afford additional access to corporate liquidity for businesses unable to avail themselves of SBA programs.
As of the date of this alert, federal business relief programs include:
- SBA Economic Injury Disaster Loans (EIDL Program). Under the EIDL Program, an eligible small business located in a region designated by the SBA as a Disaster Area can apply for up to $2 million in Section 7(b) SBA Disaster Loans to alleviate economic injury caused by the disaster. These loans can have terms up to 30 years and provide for low interest rates at 3.75% per annum for small business and 2.75% per annum for nonprofits. By applying, you become eligible to receive an Emergency Economic Injury Grant. If you request the advance, you will receive an advance of $10,000 within three days of applying. The advance does not need to be repaid if you are turned down for the loan or decide not to accept the loan once approved.
- Paycheck Protection Program (PPP). To encourage small businesses to avoid layoffs and furloughs and to rehire employees already laid off, most businesses with 500 or fewer employees including nonprofits, sole proprietorships, self-employed individuals and independent contractors, and certain businesses with more than 500 employees that meet SBA size standard determined for each industry, are eligible for forgivable loans up to $10 million to be used for payroll and certain other operating expenses, subject to certain limitations and restrictions. The loans will have a fixed interest rate of 0.50% per annum and a terms of 2 years.
In addition, SBA’s affiliation rules are waived for certain small businesses including those in the hospitality and food services industry and franchises with an SBA franchise identifier code. For businesses that retain employees and maintain payroll for an eight-week period following the receipt of the loan proceeds, up to the full amount of these loans is eligible for forgiveness. The SBA has cautioned that due to projected high participation rates, at least 75% of the forgiven amount must have been used for payroll costs. There is limited guidance about what teh details for obtaining forgiveness will be, but at this time it is anticipated to require borrowers provide evidence of uses of loan proceeds to its loan orginator. Businesses are eligible to submit applications under this program through June 30, 2020.
- SBA Debt Relief Program. For businesses with existing SBA loans, including 7(a), 504, and microloans, and small businesses that take out new SBA loans under these programs within six months of the enactment date of the CARES Act, the SBA will cover all loan payments (principal, interest and associated fees) for six months, including principal, interest, and fees, beginning on the next payment due date. If current qualifying loans are in deferment the six months subsidy will start after the current deferment ends.
- Relief for Larger Businesses. For larger businesses that do not qualify for assistance under the SBA-administered programs, Title IV of the CARES Act appropriated $500 billion to the Treasury’s Exchange Stabilization Fund to provide loans and guarantees to businesses within severely distressed sectors, including air carriers and businesses critical to maintaining national security, and to other eligible businesses, which are broadly defined to include U.S. businesses that have not otherwise received adequate economic relief under the CARES Act.
Finance Authority of Maine (FAME) is offering four special COVID-19 relief loan programs, aimed at assisting lenders, affected businesses, and consumers.
- COVID-19 Relief Lender Insurance Program. FAME is offering commercial loan insurance of 50 to 75% to lenders who make loans to Maine businesses experiencing interruption or hardship due to COVID-19. Loans must be made through FAME’s online answer program. FAME has allocated up to $10 million of its reserves to support this program.
- COVID-19 Relief Interim SBA Finance Loan Program. FAME will make direct loans of up to $100,000 with special terms available for eligible borrowers who provide proof of commitment for SBA financing. The FAME loan can be used by the business owner until the SBA loan is funded. Once the SBA loan is funded, the FAME loan would be paid off out of the SBA funds. FAME has committed to funding these loans in as little as 48 hours.
- COVID-19 Relief Business Direct Loan Program. Under this program, FAME will make direct loans of up to $50,000 with special terms available to Maine-based businesses experiencing interruption or hardship due to COVID-19.
- COVID-19 Relief Consumer Loan Program. This program provides no-cost to low-cost loans to Maine residents through a loan guarantee program involving Maine’s banks, credit unions, and FAME. Interested borrowers should contact their local bank or credit union to find out if the lender is offering the program and to apply. This program offers consumer loans of up to $5,000, minus any unemployment benefits received by the borrower. A consumer may apply for a maximum of three loans, one loan per each 30-day period.
- Small Business Recovery Loans. Massachusetts has also established a $10 million Small Business Recovery Loan Fund administered by the Massachusetts Growth Capital Corporation (MGCC). However, due to the availability of Economic Injury Disaster Loans, MGCC has stopped accepting applications for Small Business Recovery Loans.
- Municipal Programs. Some Massachusetts municipalities have developed their own grant and loan programs for small businesses within their borders. Check with your local municipality for availability.
For questions or more information on any of these programs, please contact Mary-Laura Greely or your Pierce Atwood attorney.
New Hampshire’s Business Finance Authority (BFA) has several pre-existing programs available.
- Capital Access Program (CAP). CAP is a credit enhancement program for small businesses utilized by New Hampshire banks. The CAP program provides support on term loans and lines of credit up to $200,000. The program can be used for temporary loans, working capital, equipment purchases, and many long-term uses.
- BFA Temporary Loans. Direct loans from the Business Finance Authority for any business purpose with a maximum of $200,000 and a maximum loan term of three years. Loans have flexible amortization schedules and are contingent on satisfactory underwriting. Loans require approval by the New Hampshire Executive Council.
- Community Development Finance Authority (CDFA). CDFA provides grants, loans, and tax credits to assist municipalities, nonprofits, and businesses to meet their current and ongoing needs, up to $500,000.
For questions or more information on any of these programs, please contact Scott Pueschel or your Pierce Atwood attorney.
- SBA Economic Injury Disaster Loans (EIDL). Rhode Island small businesses can apply for these loans, which carry a maximum interest rate of 3.75%. The law limits EIDLs to $2 million for alleviating economic injury caused by the disaster. The actual amount of each loan is limited to the economic injury determined by the Small Business Administration (SBA), less business interruption insurance and other recoveries up to the administrative lending limit. SBA also considers potential contributions that are available from the business and/or its owner(s) or affiliates. If a business is a major source of employment, SBA has the authority to waive the $2 million statutory limit.
- Superior Court Business Recovery Plan. The Rhode Island Superior Court has issued a COVID-19 Business Recovery Plan, by way of Administrative Order No. 2020-04. The plan will empower the court to create non-liquidating receiverships aimed at assisting qualifying Rhode Island businesses, including sole proprietorships, through the ongoing crisis.
The program is unlike traditional receiverships, where the business is often sold for the benefit of its creditors. Instead, under the plan, a non-liquidating receiver will be appointed by the court to oversee the business’s creation of an operating plan in response to the crisis. The non-liquidating receiver will be available to assist the business in obtaining access to working capital through various disaster and small business lending programs. To be eligible, among other criteria outlined in the court’s order, businesses must have been paying their debts in the ordinary course of business prior to January 15, 2020, and can no longer pay those debts as they become due on account of the pandemic. The plan does not eliminate a business’s debts, but will give it a measure of court protection from creditors while it navigates this crisis with the aim to emerge on the other side in good operating health. Click here for the Superior Court’s Administrative Order No. 2020-04.
- Rhode Island Foundation/United Way. Rhode Island nonprofit organizations at the forefront of COVID-19 response can apply for grants from the Rhode Island Foundation/United Way COVID-19 Response Fund.
- Local Initiatives Support Corporation (LISC) Rhode Island. An entrepreneur of color, or a woman-owned business or enterprise in an historically underserved community without access to flexible, affordable capital, may qualify for a grant from the Local Initiatives Support Corporation (LISC) Rhode Island. LISC will be offering grants of up to $10,000 to help small businesses fill urgent financial gaps until they can resume normal operations.
- Municipal Programs. Some Rhode Island municipalities have developed their own grants and loan programs for small businesses within their borders. Check with your local municipality for availability.
Recent Updates and Directory of COVID-19 Attorneys & Resources
With so much information, so many decisions and so little time to address issues raised by the coronavirus pandemic, you need help at your fingertips. Click here for our most recent updates and a directory of Pierce Atwood COVID-19 attorneys who are knowledgeable on the various questions and challenges you may be confronting.
We will continue to add information about specific topics so please check back frequently!
Please contact your principal attorney at Pierce Atwood or one of the attorneys in the directory for immediate assistance.