The Coronavirus Aid, Relief, and Economic Stimulus (CARES) Act provides $454 billion in support of Federal Reserve emergency lending facilities and directs the US Department of the Treasury to implement a Federal Reserve program to provide financing to banks and other lenders that make direct loans to mid-sized businesses. While the details of this potential mid-size lending program are yet to be established, the CARES Act sets out eligibility requirements, terms and conditions for the contemplated program.
The Coronavirus Aid, Relief, and Economic Stimulus (CARES) Act provides $500 billion to the US Department of the Treasury’s Exchange Stabilization Fund to make loans, loan guarantees and other investments to provide liquidity to eligible businesses, states and municipalities that are affected by the Coronavirus (COVID-19) pandemic. Of that amount, $454 billion (as well as any amounts available but not used for direct lending programs earmarked for the airline and national security industries) is made available for loans, loan guarantees and investments in support of the emergency lending facilities established by the Federal Reserve.
The CARES Act directs Treasury to “endeavor” to implement a program through the Federal Reserve to provide financing to banks and other lenders that make direct loans to mid-sized businesses. Treasury and the Federal Reserve have yet to release guidance or regulations for how such lending program for mid-sized businesses would be structured and administered, or how various CARES Act provisions setting eligibility requirements and restrictions on businesses that participate in the program will be interpreted. McDermott will update this article when more information on the program is released.
Mid-Size Business Assistance Program
The CARES Act contemplates the creation of a loan facility or program through the Federal Reserve’s emergency discount window lending powers in which financial institutions (likely to comprise mainly large commercial lenders) obtain financing from the Federal Reserve to make loans to mid-size businesses (recipients). Because the Act is vague on many key points, the precise contours of the mid-size lending program likely will be established in the term sheets issued by the Federal Reserve and Treasury, if they establish facilities or programs to provide relief to mid-size businesses. Although these details are as yet unknown, the CARES Act does set out some eligibility requirements, terms and conditions for the contemplated loan program.
Known Terms and Conditions of Mid-Size Business Assistance Loans