What CPAs Need to Know About Cares


For CPAs, one of the most important parts of the CARES loan package which has brought $2.3 trillion in loans to households, businesses, and state and local governments is the Main Street Lending Program, which provides for up to $600 billion in loans to small and midsize businesses. The Fed will also supply liquidity and certain regulatory relief to financial institutions in an effort to bolster the effectiveness of the U.S. Small Business Administration’s (SBA’s) Paycheck Protection Program (PPP).

The Main Street Facility fills a need for mid-market business funding not covered by the PPP, which was authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, to make $349 billion in forgivable loans to businesses with up to 500 employees and is being refunded at the end of April to provide an additional $310 Billion to that same demographic. 

The Main Street loan program is available to U.S. companies with up to 10,000 employees and less than $2.5 billion in 2019 revenue that were in good financial standing before the COVID-19 crisis sparked widespread stay-at-home orders and stalled the American economy, leading to nearly 17 million people filing new claims for unemployment benefits over the past three weeks.

Start the application process today

As with PPP loans, businesses seeking Main Street funding will need to apply through banks and other lenders authorized to process the loans. The opening of the PPP application window on April 3rd prompted a large number of small businesses to seek funding through SBA-authorized lenders. The large amount of applications—as many per day as the SBA usually receives in a year—resulted in delays within the agency, within banks, unprepared for the influx of applications online and in Fintech which was well-positioned to process large numbers of digital applications. 

If you haven’t already, firms should start gathering the information clients will need to apply to the Main Street program. This will be particularly urgent for clients that were ineligible for the PPP, though eligible companies can receive funds from both the PPP and the Main Street program.

Pay attention to the fine print

New Main Street loans range between $1 million and $25 million (or an amount, when added to the borrower’s existing outstanding and committed but undrawn debt, four times the borrower’s 2019 earnings before interest, taxes, depreciation, and amortization (EBITDA).) 

Main Street loans added to existing loans must be at least $1 million and no more than the lesser of $150 million, 30% of the borrower’s existing outstanding and committed but undrawn bank debt, or an amount that, when added to the borrower’s existing outstanding and committed but undrawn debt, does not exceed six times the borrower’s 2019 EBITDA.

The Main Street program requires companies that borrow the funds to make “reasonable efforts” to maintain their payroll and retain their employees during the term of the loan. Borrowers also must commit to not using the funds to repay or refinance pre existing loans and lines of credit.

Watch for changes

Due to the evolution of the outbreak and its impact on the global economy, provisions are being made to these loan programs near daily. Over the last week alone, the Fed has already taken actions to help bolster the effectiveness of the PPP. The Paycheck Protection Program Liquidity Facility (PPPLF) will extend credit to eligible financial institutions that originate PPP loans, taking the loans as collateral at face value. 

In addition, the Fed, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corp. issued an interim final rule permitting banks to not include PPP loans made under the PPPLF with any of their required capital ratios, meaning that the loans won’t be counted against the banks when examiners review their books.

In addition, the Fed said PPP lenders would not be held liable for representations made by borrowers in connection with a borrower’s request for loan forgiveness under the PPP.

Milikowsky Tax Law’s team of legal experts are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential business implications. Visit our COVID-19 Resource Center for more news, tools, and insights you need to know in these uncertain times.