This memo is designed to highlight some of the key components of the Paycheck Protection Program. In short, the Paycheck Protection Program temporarily permits the Small Business Administration (“SBA”) to guarantee 100% of small business loans to eligible borrowers and provides for forgiveness of up to the full principal amount of qualifying loans so guaranteed. The goal is to provide relief to America’s small businesses quickly in light of the devastating impact of the COVID-19 emergency, utilizing banks, credit unions and possibly other lenders to facilitate funding.
While Title IV of the CARES Act, signed by the President on March 27, 2020, urges the Secretary of the Treasury to utilize a portion of $454 Billion of funding to support loans to businesses with 500-10,000 employees, how exactly companies will qualify for such loans – particularly those in industries that are not immediately impacted by COVID-19 social distancing – is not made clear. Boards of Directors are required to make critical decisions about the likelihood of receiving CARES Act relief with limited guidance. Private equity firms, when their aggregate ownership of companies creates 500+ employee businesses, face similar challenges.