On March 27 the president signed the CARES Act into law, providing $2 trillion in aid for individuals and business throughout the United States. Great uncertainty exists within the middle market as companies scramble to determine what programs are available, whether they are eligible, and how they can take advantage of the help available to them during one of the swiftest economic declines in U.S. history.
As a result of the uncertainty and the delay to get the bill passed, most companies have created strategic plans to survive the downturn brought on by the COVID-19 pandemic without considering how their decisions might impact their ability to receive aid from one of the programs. Middle market companies should now include the possibility of financial assistance under CARES in any plans as they move forward.
Take the retail and restaurant sectors. Prior to the Act, many middle market retail and restaurant operators considered or executed plans to close underperforming locations as part of their first attempts to conserve cash and reduce expense. However, to qualify for assistance under the midsize businesses (defined as 500 to 10,000 employees) portion of the bill, there are certain criteria that need to be met, one of which is that the funds received must be used to retain at least 90% of the recipient’s workforce until September 20, 2020. Careful consideration should be given to whether a loan at very favorable terms changes any plans to close locations and reduce the workforce.
Not everyone will qualify for aid under the CARES Act, but many companies will, and the dollar amounts available are significant enough to warrant consideration from all small business and the middle market.