Vol 17 (2020) - Issue 3

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Relief for US Businesses in Response to COVID-19: The Coronavirus Aid, Relief, and Economic Security Act 2020

Introduction

The Coronavirus Aid, Relief, and Economic Security Act (the 'CARES Act' or the 'Act') was signed into law in the United States on 27 March 2020. It provided unprecedented financial assistance, totalling more than $2 trillion, to businesses and individuals impacted by the novel coronavirus COVID-19.
While the CARES Act has provided important relief to US businesses, implementation has been problematic. A centrepiece of the Act, Paycheck Protection Program loans ('PPP Loans'), was intended to provide emergency funding to small businesses (i.e., those with not more than 500 employees at a single location). As discussed in greater detail below, the Act failed to provide applicants with clear guidance concerning important aspects of the PPP Loans, including the terms of potential loan forgiveness. Roll out of PPP Loans was uneven, as many of the banks through which loan applications were processed were not properly equipped to do so when the program took effect, and other banks prioritised applications from their own customers. Much of the PPP Loan funding was diverted from intended recipients – smaller businesses – to large corporations that did not need assistance but were nonetheless eligible. In response, the US Treasury Secretary indicated there would be a 'full review' of all PPP Loans over $2 million, but for many small businesses, it may be too late.
Congress is currently working to address many of the problems associated with this comprehensive assistance program, including authorising additional funding, with the goal of limiting the damage resulting from the COVID-19 pandemic.