April 7, 2020
As the COVID-19 pandemic continues to affect several aspects of day-to-day life, many business executives and owners are wondering whether financial relief is available. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and the U.S. Small Business Administration (the “SBA”) have recently provided for certain businesses to receive financial assistance in response to COVID-19. Below is a general overview of some processes available to receive such financial relief.
The CARES Act Offers Financial Assistance to Health Care Providers Treating COVID-19 Patients
The CARES Act sets aside approximately $127 billion under the Department of Health and Human Services (“HHS”) for the Public Health and Social Services Emergency Fund, which is allocated as follows:
- $100 billion to reimburse, through grants or other payment mechanisms, certain health care providers for health care related expenses or lost revenues attributable to COVID-19;
- $16 billion to procure personal protective equipment, ventilators, and other medical supplies for federal and state response efforts;
- No less than $250 million to improve the capacity of healthcare facilities to respond to medical events;
- $11 billion for vaccines, therapeutics, diagnostics and other medical or preparedness needs, which includes at least $3.5 billion to advance construction, manufacturing and purchasing of vaccines and therapeutic delivery to the American people;
- $275 million to expand services and capacity for rural hospitals, telehealth, poison control centers, and the Ryan White HIV/AIDS Program; and
- $4 million for HHS’ Office of Inspector General for oversight activities.
These funds may not be used to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse. The appropriated funds shall be available for: (i) building or construction of temporary structures, (ii) leasing of properties, (iii) medical supplies and equipment including personal protective equipment and testing supplies, (iv) increased workforce and training, (v) emergency operation centers, (vi) retrofitting facilities, and (vii) surge capacity.
Eligible health care providers include public entities, Medicare or Medicaid enrolled suppliers and providers, and other for-profit entities and not-for-profit entities. To qualify for these funds, eligible health care providers must provide diagnoses, testing, or care for individuals with actual or possible cases of COVID-19.
The application for funds is not yet available, but, once available, eligible health care providers should submit an application to the HHS Secretary with a statement justifying the need of the health care provider for the payment, and provide a valid tax identification number. While waiting for the applications to be distributed, the American Health Association has asked that HHS use the Medicare Administrative Contractors to process applications. The HHS Secretary has stated they will view applications and provide payments on a rolling basis. For more information, the entirety of the CARES Act is available
here
.
Financial Relief is Available through Loans from the SBA to Small Businesses
Any small business with less than 500 employees, private non-profit organization, or 501(c)(19) veterans organization affected by COVID-19 may apply for the SBA’s Paycheck Protection Program (the “PPP Loan”). The PPP Loan is available through June 30, 2020, and is designed to incentivize small businesses to keep workers on payroll during the COVID-19 pandemic. According to the SBA, no collateral or personal guarantees are required. The PPP Loan has a maturity of 2 years and an interest rate of 1%.
To be fully forgiven by the SBA, the small business must keep all employees on payroll for 8 weeks, and the PPP Loan must be used for payroll costs, interest on mortgages, rent, and utilities. Specifically, at least 75% of the forgiven amount must have been used for payroll. Forgiveness will be based upon the employer maintaining or quickly rehiring employees and maintaining salary levels, and will be reduced if full-time headcount declines, or if salaries and wages decrease.
Eligible small businesses may apply for the PPP Loan through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, or participating Farm Credit System institution. The PPP Loan application is available
here
. For more information about the PPP Loan, click
here.
