Locke Lord QuickStudy: What We Know and What is Ahead: COVID-19 Financial Assistance

As of the date of this QuickStudy, although it is anticipated that Congress will increase the federal ‎funds allocated to the Paycheck Protection Program (the “PPP”) by the Coronavirus Preparedness ‎and Response Supplemental Appropriations Act (“CARES Act”), the original funds so allocated ‎have been exhausted and it is unclear when additional funds will be allocated to the PPP.  If future ‎additional funds are allocated, they may be accompanied by additional restrictions and regulations.  ‎More information on the PPP can be found in Locke Lord QuickStudy: Saving Our Small ‎Businesses: Congress Reaches Agreement on New Forgivable Paycheck Protection Loans to Small ‎Businesses. ‎

Although PPP loan applications are no longer being processed, companies negatively impacted by ‎COVID-19 may have other options for financial assistance including (i) the Employee Retention ‎Credit, (ii) the Economic Injury Disaster Loan (assuming there are additional funds allocated by ‎Congress), (iii) the Main Street Lending Program, and (iv) Direct Loans to and Investments in ‎Investment Grade Companies. ‎


The CARES Act provides for a non-governmental business to receive an Employee Retention ‎Credit (“Retention Credit”). The Retention Credit is a fully refundable payroll tax credit equal to ‎‎50% of qualified wages. Companies that qualify for the Retention Credit may, under certain ‎circumstances, receive an advance under the Retention Credit. ‎
Eligibility: ‎

  • Companies are eligible for the Retention Credit, if:‎
    • Their operations are fully or partially suspended due to government action as a ‎result of COVID-19; or ‎
    • They have gross receipts for any calendar quarter below 50% of the comparable ‎calendar quarter in 2019. ‎
  • Companies with more than 100 employees may receive the Retention Credit, but only for ‎those wages paid to employees for not providing services due to the Company’s suspension ‎of operations or gross receipts decline during the quarter.  Note, the IRS has not issued ‎guidance at this point regarding: ‎
    • how to calculate the ‎equivalent wage limitation for wages for employees who are ‎‎working on a reduced ‎‎(such as 2 days per week instead of 5 days per week) or ‎‎rotation schedule (such as ‎one week on, one week off) but are paid during the week ‎‎off even though services ‎are not provided.; or
    • how to treat employees who are ‎working a partial day of service schedule (such as 4 ‎‎hours per day, instead of 8 ‎hours per day) but are paid based on the full schedule ‎‎even though services are not ‎provided for part of the time. ‎
  • Companies with less than 100 employees may receive the Retention Credit for all qualified ‎wages paid to employees during a calendar quarter, whether they worked or not, during the ‎quarter.‎

Affiliation Rules:‎

Amount of Retention Credit: ‎

  • 50% of the qualified wages paid to an employee during the calendar quarter, up to $10,000, ‎for a maximum Retention Credit of $5,000 per employee. ‎
  • Wages taken into account are not limited to payments made directly to the employee, but ‎also include a ‎portion of the cost of employer provided health care (not including sick-leave ‎or family-leave ‎under FFCRA). ‎
  • The Retention Credit is credited against the employer’s portion of social security taxes ‎‎(“Covered Tax”) under section 3111(a) of the Internal Revenue Code. ‎
  • If the Company does not owe employment taxes in the full amount of the Retention Credit, ‎the Company may get an advance equal to the difference between the amount owed in ‎employment taxes and the amount of the Retention Credit by filling an IRS Form 7200.  ‎
  • Retention Credit is only available for “qualified wages” paid between March 13, 2020 and ‎December 31, 2020. ‎

Please Note:‎


If additional funds are allocated, assuming the rules and regulations remain substantially the same, ‎the Economic Injury Disaster Loan (“EIDL”) should once again be available for small businesses ‎from the SBA.  Some of the rules for EIDLs have been relaxed for companies affected by COVID-‎‎19 and allow for a portion of the low-interest EIDL to be forgiven.‎

Eligibility: ‎

Amount of Loan:‎

  • Up to $2 million, with the first $10,000 advance turning into a grant if used for covered ‎expenses. ‎

Please Note: ‎

There are two new programs yet to be implemented.  Both are lending programs and, unlike the ‎PPP, not forgivable.  Additional information regarding the Main Street Lending program, including a ‎summary of open questions can be found in Locke Lord QuickStudy: Help for Main Street: ‎Treasury Department and Federal Reserve Announce Main Street ‎Lending Facilities for Small and ‎Mid-Sized Businesses (including Nonprofits). ‎

These two new programs are:‎
‎(a) Main Street New Loan Facility (“MSNLF”)‎

‎(b) Main Street Expanded Loan Facility (“MSELF”)‎

Eligibility: ‎

  • A U.S. business with significant operations, and a majority of its employees based, in the ‎United States may choose to participate in either the MSNLF or MSELF if that company has ‎up to
    • 10,000 employees, OR‎
    • $2.5 billion in annual revenues in 2019‎

Summary Terms of the Loans: ‎

  • A loan made under the MSNLF is a new unsecured term loan made to a qualifying ‎company.
  • A loan made under the MSELF is an upsized term loan tranche of a qualifying company’s ‎existing term loan facility (existing prior to April 8, 2020) and may be secured or ‎unsecured, depending on terms of the existing facility.‎
  • Both are limited to terms not to exceed four (4) years;‎
  • Both allow deferral of principal and interest for one (1) year;‎
  • Both provide for adjustable interest rate of SOFR plus 250 to 400 bps;‎
  • Both permit prepayment without penalty;‎
  • Both require a minimum borrowing of $1 million;‎
  • MSELF maximum loan amount is the LOWEST of: ‎
    • $150 million; ‎
    • 30% of the borrower’s existing outstanding and committed but undrawn bank debt; ‎or ‎
    • Six (6) times the borrower’s 2019 earnings before interest taxes depreciation and ‎amortization (EBIDTA), less the borrower’s existing outstanding and committed but ‎undrawn debt.‎
  • MSNLF maximum loan amount is the LESSER of:‎
    • $25 million; or‎
    • Four (4) times the borrower’s 2019 earnings before interest taxes depreciation and ‎amortization (EBIDTA), less the borrower’s existing outstanding and committed but ‎undrawn debt.‎

Fees: ‎

  • Lender receives, under either the MSELF or the MSNLF, 100 bps on the principal amount ‎of the loan from the Company.‎
  • For the MSELF, Lender pays a facility fee of 100 bps to the common special purpose ‎vehicle (the “SPV”) established by a Federal Reserve Bank for the purpose of purchasing ‎participations in the loans.  This fee may be passed through to the borrower.‎
  • Lenders will receive another 25 bps for loan servicing from the SPV.‎

Additional Requirements and Restrictions:  Additional requirements of the MSELF and MSNLP ‎include:‎

  • Proceeds from the MSELF or the MSNLP will not be used to repay or refinance a ‎borrower’s pre-existing loans.‎
  • A borrower may not voluntarily repay debt of equal or lower priority, except for mandatory ‎principal payments;‎
  • Neither a lender nor a borrower may cancel or reduce outstanding lines of credit. ‎
  • Financing must be necessary due to exigent circumstances presented by COVID-19.‎
  • The borrower must make reasonable efforts to maintain its payroll and retain its employees ‎during the term of any loan. ‎
  • The borrower must follow restrictions with regard to compensation, stock repurchase and ‎capital distribution requirements, a summary of those restrictions can be found in Locke ‎Lord QuickStudy: Help for Mid-Sized Businesses: Congress Provides for Implementation of ‎New Direct Loan ‎Program to Eligible Mid-Size Borrowers in CARES Act. ‎


The Board of Governors of the Federal Reserve has also announced several new programs to ‎provide direct loans to U.S. companies headquartered in the United States with material operations ‎in the United States.  Companies that are eligible for these direct loans cannot be expecting relief ‎under other programs and must have investment grade ratings of at least BBB-/Baa3 from two ‎nationally recognized rating agencies.  These new programs include the following:‎

  • Primary Market Corporate Credit Facility (“PMCCF”) which will provide direct loans in ‎amounts based on a company’s credit rating at interest rates that will be “informed by ‎market conditions”;  and
  • Secondary Market Corporate Credit Facility (“SMCCF”) which will purchase corporate ‎bonds and, under certain circumstances, US-listed exchange traded funds.‎
    Concurrently, the Federal Reserve has announced plans for a Term Asset-Back Securities Loan ‎Facility.‎

While the specific details of these programs are yet to come, the above three programs are ‎anticipated to provide $300 billion in new funds.  For additional insights see Locke Lord Article: ‎Federal Reserve Will Become a Direct Lender to Corporations and as an Investor in Corporate ‎Bond Market.  ‎


The chart below shows the combinations of the programs highlighted above that can be accessed ‎simultaneously by an eligible company.  A green “check mark” () indicates that an eligible ‎company may access both programs in an intersecting row and column.  A red “X” (X) indicates ‎that a company cannot “double-dip” into the programs listed in that intersection row and column.  ‎Finally, “TBD” indicates that the program requirements have not yet been made available in ‎sufficient detail to determine permitted combinations.  ‎

 PPP  X   ✔       X  X
 MSNLF   TBD       X    X   X
 MSELF   TBD    X     X   X
 PMCCF TBD TBD  ✔  X X  ✔   X
 SMCCF TBD TBD    X  X  X  ✔  

Your regular Locke Lord contact and any of the authors would be happy to assist you with these ‎matters.‎

Visit our COVID-19 Resource Center often for up-to-date information to help you stay informed of ‎the legal issues related to COVID-19.‎