On March 19, Senate Majority Leader Mitch McConnell introduced a bill in the Senate called the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, which is intended to provide assistance and relief to various sectors of the U.S. economy.
In addition to several tax-related provisions and assistance to severely distressed sectors of the U.S. economy, including the airline industry, among other provisions, the bill also proposes the creation of a small-business interruption loan program of $300 billion.
Under the program, businesses with 500 or fewer employees or could apply for no-fee loans of up to $10 million during the covered period of March 1, 2020, through Dec. 21, 2020. Loans may be utilized for payroll support, such as salaries and paid sick or medical leave, mortgage and rent payments, and other debt obligations.
The program provides for complete deferment of loan payments for up to one year, and businesses would have the loans forgiven in the amount used to maintain payroll continuity for the period of March 1, 2020, through June 30, 2020 (with the forgiven amounts reduced for employers that terminated employees during this period). A loan recipient with tipped employees may receive forgiveness for additional wages paid to those tipped employees.
In addition to the loan and forgiveness program, the small-business portion of the bill has provisions to encourage entrepreneurial development and to provide funds for Small Business Development Centers, Women's Business Centers and Minority Business Centers, as well as a process to authorize additional financial institutions that are not currently authorized to offer Small Business Administration loans to do so during the national emergency declared by President Donald Trump.
Please note the bill still must be negotiated and is subject to change.
For any questions regarding the bill or the impact on businesses that are undergoing stress as a result of COVID-19, please contact any of the members of Kramer Levin's Bankruptcy and Restructuring Department.
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