We continue our efforts to keep you informed of key legal developments relating to COVID-19. Today, we highlight two (2) financial assistance programs under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) with an initial opening date or closing date of tomorrow.
Payroll Support to Air Carriers and Contractors: Initial Deadline is 5:00PM EDT Friday, April 3rd
As highlighted in Tuesday’s update, the U.S. Department of the Treasury (the “Treasury”) has issued guidance and application forms for payroll support assistance to passenger air carriers, cargo air carriers and eligible third‐party contractors. Eligible contractors include those that provide airline catering services and those that provide on‐airport support services to air carriers, including, but not limited to, loading/unloading of property, assistance to passengers, security, ticketing and check‐in, aircraft ground handling, and aircraft cleaning, sanitization and waste removal.
The Treasury’s “Payroll Support Application” (see HERE) indicates that the assistance will be in the form of a cash award. However, as a condition to receiving such an award, the applicant is required to identify and issue financial instruments (i.e. warrants, options, notes, preferred stock, debt securities, or other instruments issued by the applicant) to the Secretary of Treasury (the “Secretary”) as a form of “taxpayer protection” that, in the Secretary’s sole determination, provide appropriate compensation to the federal government for the provision of payroll support.
The award will be up to an amount equal to the compensation paid by the applicant to its employees for the period from April 1, 2019 through September 30, 2019. If the applicant is not required to report its salaries and benefits to the Department of Transportation, it will have to provide sworn certifications of the amount requested, along with its applicable 2019 quarterly tax filings.
The applicant must agree to certain conditions, including:
The payroll assistance ends on September 30, 2020, and is also subject to restrictions on executive compensation and severance packages.
For those who apply by 5:00PM EDT on April 3rd, the Treasury may issue awards as early as next week. The Treasury will accept applications after tomorrow’s deadline, but it may not approve them as quickly. Applications received after 11:59PM EDT on April 27, 2020, may not be considered, though Secretary has the discretion – subject to available funds – to approve such applications.
Please reach out to us if you have questions about your eligibility for this relief. We encourage all eligible businesses who are interested to apply by 5:00PM EDT Friday, April 3rd.
Small Businesses and Sole Proprietorships May Begin Applying for PPP Loans on April 3rd
According to guidance issued by the Treasury (see HERE), small businesses (generally defined as those with 500 or less employees, with exceptions for certain industries and franchises) and sole proprietorships may apply for loans under the Paycheck Protection Program (“PPP”) through SBA-approved lenders starting tomorrow, April 3rd. Independent contractors and self-employed individuals may begin applying on April 10th.
That being said, we understand that the SBA and Treasury continue to negotiate with lenders about the criteria for PPP loans to address lender concerns. Late today, the SBA issued an interim final rule (see HERE), and we are reviewing it carefully. Some questions remain open, and we also understand that the application posted on the Treasury’s website (see HERE) may be updated.
We continue to advise clients to apply for PPP loans through their bank if it is an existing SBA-certified lender. Though individual lenders may have additional requirements, we encourage interested applicants to gather relevant documentation, including:
If you do not have an existing relationship with an SBA-certified lender, or if for any reason you need to access a different SBA-certified lender, please contact us and we will endeavor to assist you in identifying an SBA-lending point of contact.
We will continue to send periodic updates on topics that may be helpful to your businesses. Our prior COVID-19 updates are available HERE. If you have a particular issue that you’d like us to address, please let us know.
Feel free to contact us with any questions.
Gery Chico and Jon Leach