The CARES Act (Coronavirus Aid, Relief and Economic Security Act) is the third phase of federal legislation directed at providing assistance to American citizens and businesses impacted by the COVID-19 pandemic. The CARES act builds upon the two previously passed bills which strengthened loans available for small businesses, addressed health provisions, and expanded sick/family leave for US citizens. This newest legislation focuses on addressing the unprecedented economic impact that combating COVID-19 has taken on individuals and businesses.
In an earlier article, we explored the basics of Economic Injury Disaster Loans (EIDL) available through the United States Small Business Administration (SBA). The CARES act shifts an additional $50 Billion towards the EIDL program while modifying eligibility requirements to qualify for EIDL loans. Additionally, the CARES act makes temporary changes to the SBA’s 7(a) program to provide $349 billion in emergency assistance for individuals and businesses effected by COVID-19. Separate from the existing SBA programs, the act provides an additional $500 billion in emergency assistance loans available through the Treasury department for industries and businesses negatively impacted by the coronavirus.
With the passage of the CARES act, those seeking financial assistance may choose to apply for either a 7(a) loan or an EIDL loan though the SBA. In order to qualify for either, a borrower must have 500 or fewer employees or meet the SBA’s size standards depending on the industry they’re in.
EIDL loans are available in states that have been declared ‘disaster areas’ by the SBA, with most states receiving such declaration as of March 25th. A borrower can apply for up to $2 million dollars in loan assistance at an interest rate of 3.75% (2.75% for non-profits) with a term of up to 30 years for repayment. Loan proceeds can be used for working capital, payroll and other expenses that the applicant could have paid had the disaster not occurred. But loan proceeds are not intended to be used to replace lost profits or to finance business expansion.
7(a) Loans allow borrowers to apply for up to 2.5 times the amount of their monthly payroll expenses with a cap of $10 million. Applicants must make ‘good faith’ certifications that the uncertainty of current economic conditions make the loan request necessary to support ongoing operations and that funds will be used to retain workers and minimum payroll or to make mortgage/lease and utility payments. The CARES act expands the amount of ‘express loans’ that can be requested through the 7(a) program, now allowing for up to $1 million to be dispersed with a 36 hour turnaround time. Interest rates are not a set rate but cannot exceed 4% and must be repaid within a 10-year period. Certain forgiveness and deferment programs are also available under the 7(a) program.
A small business cannot receive both an EIDL loan and an 7(a) SBA loan.
To for more information or to apply for either an EIDL or 7(a) SBA loan, visit the SBA website here.
Economic Stabilization Loans
The CAREs act requires that specific application and minimum requirements be published by the Treasury department within 10 days of the passage of the legislation. Until then, the act directs certain amounts to be allocated to specific industries, such as the airline industry, setting aside $454 billion for ‘other eligible businesses’ who have not received adequate economic relief through other loans provided in the CAREs act. Interest rates shall be set at rates that consider current market conditions and repayment terms are limited to a maximum of 5 years. These loans have certain stipulations around how much any one single employee can be paid during the first calendar year after the loan is disbursed. Additionally, the business is required to maintain existing employment levels as of March 24th, 2020 until September 30th, 2020, and shall not reduce it’s employment by more than 10 percent on such date.
Under the CARES act, a fund of $100 billion dollars will be created to go towards health care services related to COVID-19. Hospitals and clinicians who are enrolled in Medicare and/or Medicaid may apply for grants that reimburse expenses incurred to prevent, prepare, and respond to coronavirus. The discretion of these grants is given to the Department of Health and Human Services (HHS), with applicants required to file reports to HHS and maintain documentation with rules to be determined by the Secretary.
Hospitals will receive an add-on reimbursement of + 20% from Medicare for inpatient services related to COVID-19. CLICK HERE for more information on the new ICD-10 code for coronavirus diagnosis. Temporary adjustments to Medicare reimbursement will be available until the end of 2020, specifically extending the GPCI (geographic practice cost index) floor of 1.0 and suspending the -2% ‘sequester cuts’ which have been in place since 2013.
The CARES act provides some clarity to an uncertain path forward for businesses hit hardest due to necessary measures the country has taken to slow the spread of COVID-19. With the expansions to loan programs through the SBA and Treasury funds, businesses have more options to stay afloat during these unprecedented circumstances. Our legal counsel, Ice Miller has excellent business resources on COVID-19 available on their website HERE with specific details on CARE act loans (such as more specifics on eligibility and how to apply) available HERE.
As always, ADVOCATE will keep you up to date on this and all issues impacting radiology as they become available.
Manager of Regulatory Affairs