On Friday, March 27, 2020, the Federal government enacted the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act to provide economic relief for the devastation resulting from the current COVID-19 pandemic. The largest spending law in US history, the CARES Act includes provisions that directly impact individuals and businesses on numerous levels. This overview presents our interpretation of the Act’s Title IV provision, “Economic Stabilization and Assistance to Severely Distressed Sectors of the U.S. Economy.”


Defined “Eligible Businesses” include:

  • Air Carrier (as defined under Title 49 Section 40102 U.S. Code), or
  • a U.S. business that has not otherwise received adequate economic relief in the form of loans or loan guarantees provided under the CARES Act.


The U.S. Secretary of Treasury may make loans, loan guarantees, and other investments in support of eligible businesses, states, and municipalities that in the aggregate do not exceed $500 billion. This includes:

  • Up to $25 billion for passenger air carriers, ticket agents, and 14 CFR part 145 certified repair stations
  • Up to $4 billion for cargo air carriers
  • Suspension of certain aviation excise taxes through Jan 1, 2021
  • Up to $17 billion for businesses critical to national security
  • Up to $454 billion to make loans and loan guarantees, and investments in programs or facilities established by the Board of Governors of the Federal Reserve System for the purpose of providing liquidity to the financial system that supports lending to eligible businesses, states or municipalities
    • This provision’s participating programs or facilities shall support lending by either purchasing obligations directly from issuers, purchasing obligations in secondary markets, or making loans and advances secured by collateral.
  • Up to $25 billion allocated to passenger air carriers, $4 billion to cargo air carriers and $3 billion to contractors to preserve aviation jobs and compensate air carrier industry workers.


Within 10 days of the date of enactment of the CARES Act (i.e. by April 6th) the Secretary shall publish procedures for application and minimum requirements for making loans, loan guarantees or other investments.

To make a loan or loan guarantee to an Eligible Business, the Treasury Secretary must determine that:

  • Credit is not reasonably available for such business
  • The obligation is prudently incurred
  • The loan is either sufficiently secured or the rate reflects the risk of the loan, and
  • The loan is 5 years or less.


  • Businesses that take direct loans (i.e. air carriers and national defense) may not buyback stock, pay dividends or other capital distributions within one year of the end of loan, and must maintain employment levels of at least 90% as of March 24, 2020.
  • Eligible businesses must be created and organized in the U.S. and have significant operations and the majority of their employees in the U.S.
    • Air carriers and national security businesses must also have incurred significant losses in order to be eligible.
    • Further conditions may require such entities to be publicly traded depending on the type of instrument offered (warrants and senior debt).
    • The Secretary may require airlines to continue air service as a condition.

For Federal Reserve programs and facilities, the Treasury Secretary may make direct loans if eligible businesses agree not to buyback stock (restriction in place for 1 year after loan is no longer outstanding), and not to pay dividends (with the same one-year restriction). Additionally, for any officer who made more than $425,000 in 2019, they cannot receive more than their 2019 compensation and cannot receive severance of more than twice their 2019 compensation. Officers whose total compensation was $3M or more in 2019 may receive more than the sum of $3M plus 50% of the excess compensation over $3 million received in 2019 in any subsequent period. The Treasury Secretary may waive these requirements if deemed necessary.

The Treasury Secretary shall seek to provide financing to banks and other direct lenders that make direct loans to eligible businesses and nonprofits with between 500 and 10,000 employees. The interest rate on such loans will not be higher than 2% per annum, and no principal shall be due for the first six months.  Economic conditions must necessitate the loan, and the funds must be used to retain 90% of the workforce at full compensation until September 30, 2020.


  • Be a U.S. business (as described above),
  • Not be debtor in a bankruptcy proceeding,
  • Have significant operations in the U.S.,
  • Not pay dividends or repurchase stock,
  • Not outsource jobs during the term of the loan and for 2 years after,
  • Not abrogate existing collective bargaining agreements during the term of the loan and 2 years after, and
  • Remain neutral in any union organizing effort during the term of the loan.


  • The Board of Governors of the Federal Reserve may also establish a Main Street Lending Program if they choose. 
  • There shall be no loan forgiveness of the principal. All loans will be treated as indebtedness for tax purposes. 
  • There are several provisions regarding how banks and financial institutions handle accounting and other issues.
  • There will be a special Inspector General for pandemic recovery and a congressional oversight committee.
  • Covered Entities (i.e. entities controlled by the President, Vice President, Congressional members, and certain family members) are not eligible for this relief. 

Certain borrowers with federally backed mortgage loans who are experiencing financial hardship may request forbearance on such loan. There are also restrictions on foreclosure for servicers of Federally backed mortgage loans. There are eviction restrictions and other renter protections placed on borrowers of multifamily properties with federally backed loans who request forbearance. 

The Secretary of the Treasury will publish a description on the U.S. Treasury’s website of any assistance to air carriers or businesses critical to national security. For other loans, the Board of Governors of the Federal Reserve will provide certain reports to the Senate and House Committees overseeing banking and financial services and then shall publish such reports on their website.