As you look at the economic landscape of the United States today, it is much different than it was just a short time ago. Markets are unstable. Businesses are closing or radically changing their service delivery methods. School facilities have closed. Employees and customers are coping with orders to shelter-in-place or maintain appropriate social distancing. These changes, along with others brought on by the COVID-19 pandemic, present challenges and opportunities we have never faced before. Washington, DC, recognizes the potential effects of these changes. As of the writing of this article (March 25, 2020), the Senate and White House have reached a deal on a $2 trillion coronavirus economic package. The Senate will vote on the bill later today, and the House will likely attempt to pass the legislation through a unanimous consent measure.
The Coronavirus Economic Stabilization Act
The CARES Act (formally known as the Coronavirus Aid, Relief, and Economic Security Act) contains many impactful strategies that will positively counter these unprecedented personal and economic challenges. One of the most significant pieces of the legislation as it relates to you, however, is Division C of the Act. Also referred to as the Coronavirus Economic Stabilization Act, this section allows the Treasury Department to extend loans and loan guarantees to eligible businesses who have incurred losses as a direct result of COVID-19. The initial version of the bill indicated that the amount of the loans and loan guarantees would not exceed $150 billion. Through final Senate negotiations, this amount could increase.
Some key points included within Division C of the CARES Act are:
- The loans and loan guarantees would bear interest at a rate determined by the Secretary of the Treasury.
- No later than 10 days after the final passage of the bill, the Secretary will publish procedures for application and minimum requirements.
- An employee of an eligible business whose total compensation exceeded $425,000 in the 2019 calendar year, would not be able to earn more than his or her 2019 calendar year total in any 12-month period from March 1, 2020, through March 1, 2022.
- An employee of an eligible business would not be able to receive severance pay or other termination benefits that exceed twice the maximum total compensation received during the 2019 calendar year.
More details will become available as the Treasury Department works to write the rules and regulations that will flesh out the Act and govern the application process.
Do you have a plan to meet the evolving challenges your business faces in this uncertain time? Do you feel comfortable understanding the process, assimilating the information, and walking through the steps to obtain relief?
With our extensive experience, Carr, Riggs & Ingram can work with you to help you navigate this federal loan and loan guarantee program of the Coronavirus Economic Stabilization Act. We are entrepreneurs like you, and we have been closely involved with processes such as this before. We were there when our clients needed us during the Deepwater Horizon (BP) Oil Spill of 2010.