Accessing Coronavirus Disaster Aid to Sustain Your Software Company Through the Crisis
If your software company is like most U.S. businesses, it has been severely impacted by the ongoing coronavirus crisis and the stay-at-home orders that have been mandated across the country. Legislation was recently passed by Congress and signed into law that may make available disaster relief to your software company: the Coronavirus Aid, Relief, and Economic Security Act (the “CARES” Act).
The CARES Act established a new business loan program, the Paycheck Protection Loan Program (“PPP”), which will enable a U.S. software company qualifying as a small business to receive a loan in the amount of 2.5 times the company’s monthly payroll costs. As part of the PPP, software companies (and other small businesses) may be eligible for loan forgiveness on any loan proceeds applied during the eight week period immediately following receipt of the loan towards payroll, rent, utilities, and interest on mortgage and debt obligations incurred prior to February 15, 2020, provided that all employees are kept on the payroll for the eight week period and the documentation verifying the use is submitted to the lender. Any loan proceeds that are not forgiven will have a maturity of 2 years and an interest rate of 1%. The program is described in more detail on this weblink. The interim regulations describing how the program will work are linked here and the FAQ addressing questions and answers is linked here.
To participate in this loan program, your company should submit an application through your primary bank. Alternatively, many online and non-bank business lenders are also participating in the loan program, so working through such a lender may be an available option.
In addition, your software company may be eligible for an economic injury disaster loan advance of up to $10,000. Originally these advances were supposed to be available within 3 days of submitting an application; however, this now been revised to remove the previously defined deadline. Advances should be requested directly through the SBA website at this link: https://covid19relief.sba.gov/#/. The loan advance will not have to be repaid but the amount may be deducted from a subsequently obtained PPP loan.
It is anticipated that the funds allocated to this program are going to run out before all the applications are processed, so companies are being encouraged to submit applications as soon as possible. It is unfortunately not clear how long businesses will have to wait to receive the aid. To date, the Silicon Valley Software Law Blog is only aware of one approved business via a third party report, and has heard of no business actually receiving any aid through these programs.