CARES ACT LENDING PROGRAMS

Lending Program Summary

ProgramBrief Description
CARES Act – Coronavirus Economic Stabilization Act of 2020Treasury loans and loan guarantees to very distressed sectors of the economy, such as passenger air carriers and related entities like eligible businesses approved to perform aircraft inspections and maintenance and air ticket agents ($25 billion); cargo air carriers ($4 billion) and businesses critical to maintaining national security, such as defense contractors and aircraft manufacturers ($17 billion). In return, these businesses agree to a variety of restrictions, including retaining employees until September 30, 2020.
 
In addition to the targeted programs for the distressed businesses above, the Board of Governors of the Federal Reserve System (Federal Reserve) will make available at least $454 billion to assist businesses (including mid-size companies with between 500-10,000 employees), states and municipalities.
CARES Act – SBA Paycheck Protection ProgramSBA lending program of $349 billion to keep people in jobs and rehire laid off employees by originating and forgiving paycheck protection loans to small businesses (generally limited to 500 employees, with leniency for hard-hit industries like food service and accommodations, franchises and SBIC funded businesses). These loans would assist in the payment of covered payroll, mortgage, rent, utility, group health care benefit, and debt-servicing costs for the covered period of February 15 – June 30, 2020.
 
These loans will be made through SBA approved banks generally in amounts of 2.5x monthly payroll costs up to $10 million per company. No collateral is required. In the absence of a workforce reduction by the borrower, the loans are intended to be forgiven and keep people working.
 
Note that smaller businesses owned by private equity and venture capital funds may not be eligible due to SBA affiliation rules for small businesses that require the 500 employee count to aggregate employees of commonly owned or controlled businesses. Efforts are being made to effectuate change to the aggregation rules for this program.
SBA Economic Injury Disaster Loan ProgramLoans to provide assistance to small businesses and non-profits generally of 500 employees or less (with similar affiliation rules as the SBA Paycheck Protection Program) suffering considerable economic injury as a result of declared disasters.
 
This program is an existing SBA program. The CARES Act increased the program by $10 billion and adds a feature providing a $10,000 grant while applications are processing. These loans max out at $2 million, are subject to an economic injury test and generally require collateral.
Primary Market Corporate Credit FacilityProvides U.S.-based investment-grade employers with emergency access to credit by purchasing bonds and extending loans. Recipient must have material operations in the U.S. This facility backstops corporate debt and is scheduled to expire on September 30, 2020.
CARES Act – Coronavirus Economic Stabilization Act of 2020
Treasury loans and loan guarantees to very distressed sectors of the economy, such as passenger air carriers and related entities like eligible businesses approved to perform aircraft inspections and maintenance and air ticket agents ($25 billion); cargo air carriers ($4 billion) and businesses critical to maintaining national security, such as defense contractors and aircraft manufacturers ($17 billion). In return, these businesses agree to a variety of restrictions, including retaining employees until September 30, 2020.
 
In addition to the targeted programs for the distressed businesses above, the Board of Governors of the Federal Reserve System (Federal Reserve) will make available at least $454 billion to assist businesses (including mid-size companies with between 500-10,000 employees), states and municipalities.
CARES Act – Coronavirus Economic Stabilization Act of 2020
Treasury loans and loan guarantees to very distressed sectors of the economy, such as passenger air carriers and related entities like eligible businesses approved to perform aircraft inspections and maintenance and air ticket agents ($25 billion); cargo air carriers ($4 billion) and businesses critical to maintaining national security, such as defense contractors and aircraft manufacturers ($17 billion). In return, these businesses agree to a variety of restrictions, including retaining employees until September 30, 2020.
 
In addition to the targeted programs for the distressed businesses above, the Board of Governors of the Federal Reserve System (Federal Reserve) will make available at least $454 billion to assist businesses (including mid-size companies with between 500-10,000 employees), states and municipalities.
CARES Act - SBA Paycheck Protection Program
SBA lending program of $349 billion to keep people in jobs and rehire laid off employees by originating and forgiving paycheck protection loans to small businesses (generally limited to 500 employees, with leniency for hard-hit industries like food service and accommodations, franchises and SBIC funded businesses). These loans would assist in the payment of covered payroll, mortgage, rent, utility, group health care benefit, and debt-servicing costs for the covered period of February 15 – June 30, 2020.
 
These loans will be made through SBA approved banks generally in amounts of 2.5x monthly payroll costs up to $10 million per company. No collateral is required. In the absence of a workforce reduction by the borrower, the loans are intended to be forgiven and keep people working.
 
Note that smaller businesses owned by private equity and venture capital funds may not be eligible due to SBA affiliation rules for small businesses that require the 500 employee count to aggregate employees of commonly owned or controlled businesses. Efforts are being made to effectuate change to the aggregation rules for this program.
SBA Economic Injury Disaster Loan Program
Loans to provide assistance to small businesses and non-profits generally of 500 employees or less (with similar affiliation rules as the SBA Paycheck Protection Program) suffering considerable economic injury as a result of declared disasters.
 
This program is an existing SBA program. The CARES Act increased the program by $10 billion and adds a feature providing a $10,000 grant while applications are processing. These loans max out at $2 million, are subject to an economic injury test and generally require collateral.
Primary Market Corporate Credit Facility
Provides U.S.-based investment-grade employers with emergency access to credit by purchasing bonds and extending loans. Recipient must have material operations in the U.S. This facility backstops corporate debt and is scheduled to expire on September 30, 2020.

Executive Summary Comparison Chart

Industry-Specific Treasury Loans and Loan Guarantees

Eligibility

Specific U.S.-based businesses:

  • Passenger air carriers; eligible businesses approved to perform aircraft inspections and maintenance; and air ticket agents ($25 billion)
  • Cargo air carriers ($4 billion)
  • Businesses critical to maintaining national security ($17 billion)

Maximum Amount

Program limits described above, but no individual loan limits announced yet

Interest Rate

Based on risk and current average yield on outstanding U.S. marketable obligations

Collateral

Sufficiently secured, or interest rate reflects risk

Maturity

5 years or less

Payment Deferrals

CARES Act is silent

 

Other Notable Features

  • Restrictions on buybacks, dividends and compensation
  • Limitations on workforce reductions
  • Issuance of warrants, equity interests or senior debt instruments to the Treasury
Industry-Specific Treasury Loans and Loan Guarantees

Eligibility

Specific U.S.-based businesses:

  • Passenger air carriers; eligible businesses approved to perform aircraft inspections and maintenance; and air ticket agents ($25 billion)
  • Cargo air carriers ($4 billion)
  • Businesses critical to maintaining national security ($17 billion)

Maximum Amount

Program limits described above, but no individual loan limits announced yet

Interest Rate

Based on risk and current average yield on outstanding U.S. marketable obligations

Collateral

Sufficiently secured, or interest rate reflects risk

Maturity

5 years or less

Payment Deferrals

CARES Act is silent

 

Other Notable Features

  • Restrictions on buybacks, dividends and compensation
  • Limitations on workforce reductions
  • Issuance of warrants, equity interests or senior debt instruments to the Treasury
Mid-Sized Business Program

Eligibility

U.S.-based businesses with 500 to 10,000 employees

Note: This is a specific program authorized by CARES Act to provide financing to banks and other lenders to make direct loans; other specific programs may follow, such as a “Main Street” lending program

Maximum Amount

$454 billion program (plus amounts not used by the industry specific baskets), but no individual loan limits announced yet

Interest Rate

2% or less

Collateral

TBD, but expect collateral

Maturity

CARES Act is silent

Payment Deferrals

No principal or interest payments for the first 6 months

Other Notable Features

  • Restrictions on buybacks, dividends and compensation
  • Limitations on workforce, pay and benefits reductions and workforce; pay and benefits restoration
  • Outsourcing and offshoring restrictions
  • Abrogation of collective bargaining agreements restriction
  • Union neutrality
Paycheck Protection Loans

Eligibility

  • Loans for covered payroll, mortgage, rent, utility, group health care benefits and debt servicing costs
  • Generally, eligible businesses are those with fewer than 500 employees, but subject to exceptions (with affiliate counting, but subject to exceptions for food service and accommodation businesses, franchises and SBIC-backed businesses)

Maximum Amount

Lesser of: (i) $10 million, or (ii) 2.5x average monthly payroll costs plus the amount of any economic injury disaster loan obtained after January 31

Interest Rate

4% or less

Collateral

None

Maturity

10 years or less from the date the borrower applies for forgiveness

Payment Deferrals

No principal or interest payments for 6 months to 1 year

Other Notable Features

Loan forgiveness feature

Economic Injury Disaster Loans

Eligibility

  • Loans for small businesses and non-profits suffering injury as a result of declared disasters
  • Generally, eligible businesses are those with fewer than 500 employees, but subject to exceptions (with affiliate counting, but no exceptions)

Maximum Amount

Generally, $2 million

Interest Rate

  • 3.75% for small businesses
  • 2.75% for nonprofits

Collateral

Generally required for loans of $25,000 or more

Maturity

30 years or less

Payment Deferrals

Not required to repay $10,000 advance

Other Notable Features

$10,000 emergency advance feature

Primary Market Corporate Credit Facility

Eligibility

Investment-grade U.S.-based companies

Maximum Amount

Limits based on ratings and amount of existing bonds and loans

Interest Rate

Dependent on market conditions

Collateral

TBD

Maturity

4 years or less

Payment Deferrals

Optional 6 months PIK election for interest, subject to restrictions on buybacks and dividends

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