The coronavirus outbreak has caused significant global health problems and disruptions which may forever alter the manner in which many companies conduct business.  Congress responded to the global catastrophe by quickly approving the $2.2 trillion CARES (“Coronavirus Aid, Relief and Economic Security”) Act to stimulate the economy.

Businesses of 500 employees or less are considered “small businesses” and are eligible for the Act’s Paycheck Protection Program.  $349 billion has been earmarked so that these businesses can maintain operations and payroll, and avoid layoffs.  Businesses can borrow up to 2 ½ times their monthly payroll expenses, up to $10 million.  The loan can be used to cover qualified payroll costs, utilities, mortgage interest and other debt obligations.  Loan forgiveness is available for funds used to pay payroll and other expenses.  The debtor is required to pay 4% interest which can be deferred.

The amount of loan forgiveness may be decreased if the debtor business reduces its number of employees or the employees’ compensation.  Thus, businesses should try to avoid reducing employees or compensation before analyzing this program, because such action could make a business ineligible or reduce the amount of loan forgiveness the business may receive.

This is an amazing tool which comes at a time when businesses and their employees desperately need help.  Hypothetically a struggling company could secure a $1 million loan for payroll obligations and would only be responsible for paying the interest ($40,000).

The loan can only be applied to employees whose annual compensation does not exceed $100,000.  Certain businesses in the food industry and non-profit organizations can apply for this loan regardless of employee size.  The funds will be allocated on a first come/first serve basis and it is important that businesses analyze this program and/or consult with financial advisors quickly.

To apply, a business should work with one of the more than 1,800 lenders who are approved by the Small Business Administration (“SBA”).  If your financial institution is not an approved lender or if you do not work with a financial institution, or if you have general questions, you can call the SBA at 1-800-659-2955 for assistance.

Medium-sized businesses (500-10,000 employees) and large businesses (more than 10,000 employees) are eligible to receive $500 billion in loans and other funding.  The Treasury Department will consider these businesses for Economic Stabilization and Assistance Loans and loan guarantees.  These loans can be critical to bail out larger businesses which need funds to maintain operations but are having difficulty obtaining credit.

Entities which are involved in the manufacture and sale of respirators for the COVID-19 outbreak stand to benefit from a civil tort liability provision which provides immunity to those who manufacture, test, distribute or administer “respiratory protective devices” during the public health crisis period.

The world is traveling through uncharted waters, and it is important to follow coronavirus developments and consider taking advantage of opportunities such as the CARES ACT.


Michael McKeon

Mr. McKeon is a shareholder at the Lavin Firm who concentrates his practice on complex product liability, commercial litigation, mass tort, insurance and personal injury matters.  He has worked at the Lavin Firm since 2007.