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Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Exchange Stabilization Fund

You have most likely heard about financial resources for small businesses made possible by the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act – the $2 trillion relief package signed into law on March 27. It is important to note Division A, Title IV of the Act also provides $500 billion to the U.S. Treasury Department’s Exchange Stabilization Fund to provide loans, loan guarantees and other investments to severely distressed sectors of the economy. This includes:

  • $454 billion for Federal Reserve loans, loan guarantees, and investments to eligible mid-size or large businesses that have not otherwise received adequate economic relief, as well as states, and municipalities.
  • $46 billion for air carriers and related businesses, as well as businesses important to maintaining national security.

Companies seeking these funds should be aware of loan requirements and be prepared to ensure compliance.

Some requirements may include:

  • Limits on executive/officer compensation
  • Prohibition of stock buybacks or dividend payments through the life of the loan
  • Obligation not to offshore/outsource jobs for the term of the loan plus two years
  • Cannot pay dividends for term of the loan plus one year
  • Businesses can only invest in, or loan to, American businesses
  • Businesses will retain 90% of workforce

For more information on funding available through the Exchange Stabilization Fund, explore the resources below:
Treasury Department CARES Page | National Law Review CARES Act Summary | Grant Thornton Analysis of U.S. Government response to the Coronavirus Pandemic | Steptoe Cares Act Analysis

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