By Stephanie Mercado

Though most of the attention has been on the forgivable loans available to millions of small businesses impacted by COVID-19, the CARES Act also provides significant relief to mid-size businesses. Specifically, the Act authorizes the Secretary of the Treasury to make up to $500 billion of low-interest loans, loan guarantees and other investments to eligible businesses, states and municipalities. While $46 billion is restricted for use in assisting (i) passenger air carriers and related businesses, (ii) cargo air carriers and (iii) businesses critical to the maintenance of national security, the balance of $454 billion is specifically allocated to assist mid-size businesses, states and municipalities.

Loans to Businesses

The low-interest loans will be made through programs created by the Board of Governors of the Federal Reserve System. The programs will be facilitated through a combination of direct lending and guarantees to support and encourage lending through bank or non-bank lenders to “eligible businesses.”

An “eligible business” includes the industries listed above along with any other business that has not already received adequate economic relief in the form of loans or loan guarantees under other provisions of the Act.

Mid-Size Business Loans

The Act specifically directs the Secretary to create a loan program for businesses and non-profit organizations with 500-10,000 employees. The loan program, administered through traditional banks and lenders, shall:

  • Provide an interest rate at no greater than 2% per annum
  • Require no payment of principal or interest for at least the first six months of the loan or greater, as determined by the Secretary

The Act specifically prohibits forgiveness of this loan. The Act does not contain language concerning the loan term or amount.

Mid-Size Business Loan Qualifications & Post Term Requirements

To qualify for the loan, the borrower must provide a good faith certification that:

  • The loan request to support the ongoing operations of the borrower is necessary based on economic conditions;
  • The funds received will be used to retain at least 90% of the borrower’s workforce, at full compensation and benefits, until Sept. 30, 2020;
  • In the event that the business laid off or furloughed employees, it intends to restore not less than 90 percent of its workforce that existed as of Feb. 1, 2020, and to restore all compensation and benefits to the workers of the recipient no later than four months after the termination date of the COVID-19 emergency;
  • The borrower is domiciled in the United States, created or organized under the laws of the United States, has significant operations in the United States and the majority of its employees are located in the United States;
  • The borrower is not a debtor in a bankruptcy proceeding;
  • The borrower will not pay dividends or repurchase common stock that is listed on a national securities exchange of the borrower or any parent company during the term of the loan (unless otherwise required under a contractual obligation that is in effect as of the date of enactment of the Act);
  • The borrower will not outsource or offshore jobs for the term of the loan and two years after completing repayment of the loan;
  • The borrower will not abrogate existing collective bargaining agreements for the term of the loan and two years after completing repayment of the loan; and
  • The borrower will remain neutral in any union organizing effort for the term of the loan.

The Act does not provide a required timeline for the Secretary to create the Mid-Size Business Loan program. KJK will continue to provide updates as the program rules are established. Notwithstanding the lack of guidance, if your company has between 500-10,000 employees, we recommended immediately consulting with your lender to discuss any potential application procedures.

KJK will continue to monitor and provide timely updates on all issues related to the CARES Act and other COVID-19 legal matters, including the Mid-Size Business Loan. For more questions contact Stephanie Mercado at or 216.736.7272.