On April 23, 2020, pursuant to Section 4003(b)(3) of the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136 ("CARES Act"), the U.S. Department of Treasury ("Treasury") released a loan application form for "businesses critical to maintaining national security." While the application form is "for informational purposes only" to allow prospective borrowers to begin to prepare their respective submissions, Treasury announced on April 25, 2020 that applications may be submitted online beginning on April 27, 2020.
Interested companies are advised to prepare and submit their applications promptly as applications are due at 3:00 P.M. EDT on May 1, 2020. Applications received after that time may not be considered. However, Treasury maintains discretion to consider late applications for approval subject to the availability of funds. Prospective borrowers are reminded that, unlike under the Paycheck Protection Program available to small businesses, loan forgiveness is not available under this loan program.
Specifically, the CARES Act authorizes the Treasury to make available up to $17 billion in loans and loan guarantees for "businesses critical to maintaining national security." Section 4003(a), (b)(3). During an interview on April 23, 2020, Treasury Secretary Steven Mnuchin, in describing the intended beneficiaries of this loan program, stated that, "[t]his pot of money was designed to consider the needs of defense contractors, key suppliers to [the Department of Defense], and other companies that carry classified information."
The purpose of the loan program is to provide liquidity to offset covered losses, which include losses incurred directly or indirectly as a result of the coronavirus (COVID-19) pandemic. Importantly, an applicant is eligible only if it has "not otherwise received adequate economic relief in the form of loans or loan guarantees" provided under the CARES Act. Section 4002(4)(B).
Treasury has defined a "business critical to maintaining national security" as one that, at the time of the loan application, is either:
Dep't of Treasury, Q&A: Loans to Air Carriers and Eligible Businesses and National Security Businesses (updated as of Apr. 10, 2020).
The application requires applicants to submit detailed information supporting either of the above. If an applicant does not satisfy either threshold requirement, it may nevertheless be considered for a loan if the Secretary of Treasury, based on a recommendation and certification by the Secretary of Defense or the Director of National Intelligence, determines that the applicant is critical to maintaining national security.
In addition to requiring information supporting either of the above criterion, the loan application requires applicants to provide information regarding their:
Applicants must also submit a financial plan. Two company officials must certify that the information and certifications provided in the application are true and correct.
Importantly, prior to submitting an application for a loan under this program, potential borrowers should be aware that such loans will be subject to certain conditions and restrictions, including:
Businesses interested in applying for a loan under this program should carefully evaluate the applicable conditions and restrictions. Prospective borrowers are also advised that recipients of Treasury funds may be subject to increased government oversight and investigations, especially with respect to the certifications required in the application.
Further, any companies interested in applying should prepare their materials promptly to ensure submission in advance of the 3:00 P.M. EDT on May 1, 2020 deadline.
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