CARES Act Amendment Summary

On Tuesday, April 21, the Senate passed an amendment to the CARES Act that, among other things, would amend certain provisions of the Paycheck Protection Program (“PPP”), economic injury disaster loans, and emergency grants. The amendment is expected to pass the House later this week and the president has indicated he would sign it. In some ways, the amendment is as notable for some of the things it did not do – it did not create eligibility for financial services firms including community banks and secured lenders to borrow PPP loans, and it did not include rumored restrictions on larger borrower’s access to PPP – as it is for what it did do (increase funding and create a set-aside of PPP guarantees for PPP loans made by certain small and community development lenders).  In addition, the amendment provides additional funding for economic injury disaster loans under Section 7(b)(2) of the Small Business Act (“EIDL”) and for the $10,000 emergency grants available in connection with that program (“Emergency Grants”).

Increased Appropriations. The amendment would provide an additional $310 billion for PPP loans, $60 billion of which has been earmarked for distribution by (a) depository institutions and credit unions with assets less than $50 billion and (b) community financial institutions.  The amendment would also provide another $50 billion for EIDL, an additional $10 billion for Emergency Grants and $2.1 billion for SBA salaries and expenses, as well as additional funding and other revisions for coronavirus public health and Health and Human Services programs, which are not addressed here.

Set Aside for Insured Depositary Institutions, Credit Unions and Community Financial Institutions.  The amendment would also amend the PPP to require the SBA to set aside $60 billion of the newly authorized $310 billion of PPP funds for PPP loans issued by (a) community development financial institutions (as defined in section 103 of the Riegle Community Development and Regulatory Improvement Act of 1994), (b) minority depository institutions, as defined in section 308 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, (c) development companies that are certified under title V of the Small Business Investment Act of 1958, (d) an intermediary under the SBA’s Microloan Program (as defined in Section 7(m)(11) of the Small Business Act) (the institutions described in clauses (a) through (d), “Community Financial Institutions”), (e) state and federal credit unions with less than $50 billion of assets and (f) depository institutions with less than $50 billion in assets.  The $60 billion set-aside is further sub-divided so that $30 billion would be earmarked for PPP loans made by insured depository institutions and credit unions with at least $10 billion and less than $50 billion in assets, while the other $30 billion would be earmarked for PPP loans by depository institutions and credit unions with assets of less than $10 billion and by Community Financial Institutions.

Agricultural Enterprises.  The amendment would make agricultural enterprises (defined in Section 18(a) of the Small Business Act as “small business concerns engaged in the production of food and fiber, ranching, and raising of livestock, aquaculture, and all other farming and agricultural-related industries”) with 500 or fewer employees eligible for EIDL and Emergency Grants.