Treasury Releases Application for Loans to Businesses Critical to Maintaining National Security
The U.S. Department of the Treasury has released a web-based application for loans under the $17 billion loan program for businesses critical to maintaining national security created by the CARES Act. Treasury also provides a model application form to allow potential borrowers to prepare the information required. Applications for the loans are due by 3:00 p.m. eastern on May 1, 2020. Applications received after that time may not be considered.
To apply for the loans, businesses are required to submit corporate and financial information, including:
- Corporate and ownership structure;
- Debt, lines of credit, other material indebtedness, and credit ratings;
- Assets, available security, equity;
- Revenue and expenses in 2019 and the first quarter of 2020;
- Financial plans detailing the need for and planned use of loan proceeds; and
- Descriptions of U.S. operations.
The application also seeks information on the numbers of employees based in the U.S. and abroad as of March 24, 2020, and planned employment changes. The CARES Act requires a borrower to maintain employment levels as of March 24, 2020 until September 30, 2020, to the extent practicable, and not to reduce employment levels by over 10%.
An applicant is required to submit “evidence based on market conditions, the Borrower’s circumstances, or relationships with existing or potential creditors that credit is not reasonably available to the Borrower elsewhere.” The CARES Act requires the Secretary of the Treasury to determine that “credit is not reasonably available” to the applicant before making a loan under the $17 billion program.
In guidance issued April 10, 2020, Treasury defined “businesses critical to maintaining national security” as those performing under DX priority rated contracts or operating under valid top secret facility clearances. The application includes questions about these bases of eligibility. Additional businesses may be considered eligible for the loans on the basis of recommendations and certifications from the Secretary of Defense or the Director of National Intelligence, with determinations from the Secretary of the Treasury. While this basis of eligibility is mentioned in the application, no information is provided on the process for securing the necessary recommendations, certifications, and determinations. It remains unclear, for instance, whether and how a potential applicant would initiate the process. View our alert on eligible businesses and loan conditions here.
We continue to monitor the various forms of assistance available to businesses under the CARES Act. Please visit our Coronavirus: Preparation & Response series for additional resources we hope will be helpful.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.