Certain provisions of the Coronavirus/Covid-19 economic stimulus legislation are subject to the issuance of government regulations and other government action, thus certain details regarding the legislation may be clarified or added.

On March 27, 2020, President Trump signed in to law an unprecedented economic relief package (the “CARES Act”) designed to help businesses and their employees ride out the economic turmoil caused by COVID-19. We have reviewed the two major loan programs established by the CARES Act and prepared a summary of each of the programs.

The first program created by the CARES Act is a new Small Business Administration (SBA) loan program known as the “Paycheck Protection Program,” which provides employers with low-interest loans in amounts of up to $10 million. If the proceeds of such SBA loans are used to provide payroll, rent, mortgage interest and utilities, a portion of such loan will be permanently forgiven.

In addition to the Paycheck Protection Program, the Federal Reserve will establish programs and facilities to provide an additional $500 billion in loans to support U.S. businesses whose continuing operations are jeopardized by COVID-19. Although $46 billion is set aside for the airline industry and other businesses critical to maintaining national security, the eligibility requirements for the remaining $454 billion are subject to a broad mandate under the direction of the Secretary of the Treasury. Businesses seeking a loan under the Federal Reserve program must agree on certain limitations on stock repurchases, dividends, layoffs and, in some cases, executive compensation.