Effective September 8, 2021, the U.S. Small Business Administration (“SBA”) significantly expanded the ability of small businesses to apply for low-interest loans through the revised COVID Economic Injury Disaster Loan (“EIDL”) program.  The program will end on December 31, 2021, or until funds are exhausted, whichever occurs sooner, suggesting that all applicants looking to apply should do so as soon as possible.

The COVID EIDL program is an “improved” version of the “regular” EIDL program that existed prior to (and will exist after) the pandemic.  The purpose of the EIDL program is to help businesses meet operating expenses and financial obligations that would have been met had the pandemic not occurred.  It is intended for businesses already in operation prior to the beginning of the pandemic.

Eligibility:  An eligible business must meet the following criteria:

  • Location of Business: The business must be located in the United States or a designated territory.
  • Immigration Status of Owners:
    • For-profit businesses (other than sole proprietorships): The business must have a valid IRS-issued tax identification number and each owner, member, partner of shareholder of 20% or more of the business must be a U.S. citizen, a non-citizen national or a qualified alien with a valid social security number.
    • Sole proprietorships: U.S. citizen, a non-citizen national or a qualified alien with a valid social security number.
    • Note: As drafted these requirements do not apply to not-for-profit entities.
  • Size of Business: COVID EIDL size standards have been revised to include the following:
    • A business that, together with its affiliates, has 500 or fewer employees.
    • A private nonprofit organization that has an effective ruling letter from the IRS under 501(c), (d) or (e) of the IRS Code, or satisfactory evidence from the relevant State that it is a nonprofit organization under state law or it is a faith-based organization.
    • A business that, together with affiliates, has more than 500 employees, if it:
      • falls within a list of industries identified by NAICS codes, which include educational services (61), arts, entertainment and recreation (71), accommodation and food services (72), support activities for mining (213), industry group (213), beverage manufacturers (3121), apparel manufacturing (315), clothing and clothing accessories stores (448), sporting good, hobby, book and music stores (451), air transportation (481), transit and ground passenger transportation (485), 487 scenic and sightseeing transportation, publishing industries (except internet) (511), motion picture and sound recording industries (512), broadcasting (except internet) (515), rental and leasing services (532), and personal and laundry services (812);
      • does not employ more than 500 employees per physical location; and
      • does not have more than 20 locations. The 20 location limit includes the number of locations the affiliates have, if any.
  • Affiliate rules: An affiliate is any business in which an applicant business (i) owns at least 50%, (ii) has a right to at least 50% of profit distributions, or (iii) has the contractual authority to control the direction of the business.  The affiliation is determined as of the agreements in existence as of January 31, 2020. Note:  As drafted this does not include parent entities only subsidiaries.
  • Credit Score: For-profit businesses need to have a minimum credit score which depends on the amount of loan requested.  For loans of $500,000 or less, a minimum score of 570 is necessary.  For loans greater than $500,000, a minimum score of 625 is necessary.
  • Ineligible businesses include:
    • Businesses not in operation on or before January 31, 2020 (“in operation” includes businesses that were in organizational stages but had not yet opened for business).
    • Businesses in certain industries including a business that earns more than 1/3 of its gross annual revenue from gambling, a business engaged in multi-level sales distribution, lending, investment, or real estate development or investment (other than rental properties), most publicly owned nonprofit organizations, businesses whose owners had a past involving criminal activity, businesses that had revenue and did not file 2019 taxes and others. Note:  It is not clear exactly how the real estate provision exclusion applies as some of the industries specifically targeted to be supported by this program (and that are the beneficiaries of the exception to the 500 employees rule) may also involve real estate investment or development.  We would expect this inconsistency to be explained as this program moves forward.
    • Businesses that have filed for chapter 7 bankruptcy, are being liquidated under Chapter 11 and/or are permanently closed. Note: Businesses that are operating under an approved reorganization plan under Chapters 5, 11, 12 or 13 are eligible. 
    • If the business had a change of ownership above 50% since the start of the pandemic, the business is not eligible for the EIDL loan unless the change involved a close family member or partner, or the contract for sale existed prior to January 31, 2020.
  • PPP: If the business had received a PPP loan, that alone does not disqualify the business from the program.  The business may use EIDL funds to repay PPP loan (or other loans obtained from the government).

Terms of the EIDL loan:

  • Loan Cap: The maximum loan amount has been raised from $500,000 to $2 million per business.  The aggregate loan cap for entities within the same corporate group (defined based on majority ownership) has been raised to $10M. Businesses that obtained prior EIDL loans may apply to increase their loan amount.
  • Interest: For for-profit businesses, the interest rate will be 3.75% over a 30-year fixed amortization period.  For not-for-profits, the interest rate will be 2.75% over a 30-year fixed amortization period.
  • Amortization: Payments are deferred for the first 24 months from the original loan closing date, during which payments shall accrue, and then principal and interest payments are to be made over the remainder of the loan.  There are no pre-payment penalties or fees.  Additionally, the credit-elsewhere requirement will be waived.
  • Use of Funds: The EIDL loan can be used to fund working capital necessary to carry on the business and for expenditures necessary to alleviate the specific economic injury caused by the pandemic.  This includes expenditures and debts such as working capital, prior business debts (for example, mortgages and credit card debts), payroll, the continuation of health care benefits, rent, maintenance, utilities, and fixed debt payments. EIDL loans cannot be used to expand the business.  The EIDL loan can be used to fund the continuation of renovations, but not new renovations to expand the business or to repay debts owed to a federal agency.
  • Amount: The SBA will award the loan amount based on the following criteria.
    • If the requested loan amount is $500,000 or less: For applicants in operation before January 1, 2019, the lesser of (i) double the business’ 2019 gross revenue minus the 2019 cost of goods or (ii) $500,000 (whichever is less).  If the business was not in operation on January 1, 2019 the SBA will calculate the maximum loan amount.
    • If the requested loan amount is over $500,000: The SBA will underwrite the loan based on a cash flow analysis.  The maximum loan amount is $2 million per business.
  • Guarantee: A personal guarantee is required for all loans above $200,000 by all 20% or more owners and all general partners and managing members, regardless of ownership percentage.  If no single owner owns more than 20%, at least one individual or entity must provide a full guaranty.  No guarantee is required for nonprofit organizations or ESOPs.
  • Collateral: No collateral is required for loans up to $25,000.  For loans over $25,000, the SBA uses a general security agreement to secure collateral.  The designated collateral consists of existing business assets, such as machinery, equipment, fixture, furniture, or similar property.  Businesses do not need to find new collateral, and the collateral does not include real estate or personal collateral.  The collateral will be subordinated to prior debt (including mortgages).  For loans over $500,000 the SBA also requires a best available (i.e., subject to any existing mortgages in place) mortgage on real estate owned by the borrowing business.
  • Forgivable: The EIDL loan is not forgivable, however, to the extent the borrower receives an EIDL Advance (which may be up to $15,000), that amount does not need to be repaid (although it may be deducted from any forgivable amounts under the PPP).
  • Exclusivity Period and Timing: Starting September 8th, 2021, the SBA is accepting applications for loans both under and over $500,000.  The SBA will begin approving loans greater than $500,000 on October 8, 2021.  The SBA is expecting to review applications within three weeks for requests under $500,000 and within six weeks for requests over $500,000.  For applicants planning to request less than $500,000 and then apply for a subsequent increase if approved for the initial request, the timeline is expected to be a total of about nine weeks, resulting from adding three weeks for the initial request and six weeks for the subsequent request.

How to Apply:

  • Existing recipients: For existing recipients, the business should use the same sign-in to the portal. For businesses that have already submitted a Form 4506-T for a SBA loan or grant, the business must submit a new version of the Form 4506-T to apply for the revised EIDL loan program or for a loan increase.  The recipient will then receive an email link, and can follow instructions from there.
  • New applicants: To apply for the loan, business are required to submit a signed and dated Form 4506-T.  This form authorizes the IRS to release business tax transcripts to the SBA to verify the business’ revenue.

A link to the application can be found by clicking here.  For more information, please see the SBA’s official FAQs here.

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Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. We will continue to evaluate the American Rescue Plan Act, the CARES Act, the Consolidated Appropriations Act, 2021, related regulations and any subsequent legislation to provide our clients guidance in real time. Please visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take, and resources to help manage ongoing operations.

Photo of Yuval Tal Yuval Tal

Yuval Tal is a partner in our Corporate Department where he co-heads our internationally recognized Hospitality, Gaming & Leisure Group. He also heads our Hong Kong and Beijing offices. He is a general corporate and securities lawyer with diverse experience in cross-border mergers…

Yuval Tal is a partner in our Corporate Department where he co-heads our internationally recognized Hospitality, Gaming & Leisure Group. He also heads our Hong Kong and Beijing offices. He is a general corporate and securities lawyer with diverse experience in cross-border mergers & acquisitions (public and private, debt and equity), long-term joint ventures, private equity real estate and corporate and real estate finance. He advises clients on the full range of their activities including any form of financing, operational matters and commercial transactions. He advises sponsors and funds on the structuring, execution, entering into, restructuring and exiting of investments. Yuval is co-chair of Proskauer’s CARES Act Team and a part of the Firm’s cross-disciplinary, cross-jurisdictional Coronavirus Taskforce helping to shape the guidance and next steps for clients impacted by the pandemic.

Yuval has decades of experience representing clients on complex, first in kind transactions.  Yuval’s strength is providing original, workable and practical solutions that get the deal done. Qualified in New York, Hong Kong and Israel, Yuval has negotiated transactions in six continents and has particular experience representing Asian clients and clients based outside of Asia in inbound and outbound transactions. Yuval has worked in various industries including real estate, hospitality, entertainment, sports, financial services, technology and life sciences.

As an international M&A lawyer, Yuval has many years of experience dealing with complicated, non-customary transactions involving parties from different countries, cultures and legal systems.  He has represented private equity, family offices, corporations and individuals in structuring, restructuring, managing and disposing of investments in Asia, Europe and the United States.  He is typically called upon to strategize and structure complex transactions that do not follow a prescribed form or pattern. Yuval’s experience enables him to forsee future issues and clients have commented on his “ability to think seven moves ahead of the competition”. Yuval is also well known for his ability to broker deals between opposing parties in order to get the deal done, irrespective of the legal, business or practical obstacles. His efforts have earned him recognition by Legal 500Chambers Asia Pacific and IFLR1000, where clients have referred to his “ability to play the honest broker to all parties involved, and to bridge the different cultures, legal systems and language barriers and to continually solve the unsolvable, is what allowed us to get this difficult deal done” and another stated “he was completely invested in the deal in a way lawyers seldom are, and his creativity and efforts allowed us to bridge considerable gaps between the parties and find common ground”.

As co-head of our Hospitality, Gaming & Leisure Group, Yuval has worked on virtually any kind of transaction, including mixed-use development and construction, acquisition and sale, restructuring and public offerings of real estate, hotel and casino companies. He has completed numerous high profile transactions involving the buying, selling and combining Asian and Western based hotel operating companies, including AccorHotels’ [EPA:AC]  US$2.9 billion acquisition of Fairmont, Raffles and Swissôtel brands, its acquisition of Tribe, Australia’s first integrated modular hotel brand, Accor’s long-term alliance with Huazhu Hotels Group (also known as China Lodging Group [Nasdaq: HTHT]) and its strategic partnership with Singapore-based Banyan Tree Holdings [SGX:B58]. He also advised Formosa International Hotels’ sale and resulting joint venture with Intercontinental Hotels Group with respect to the Regent brand.  His real estate and hospitality work has included transactions for properties from China to India to the United States to Australia. He also has many years of experience with hotel licensing, franchising and management.

Yuval’s broader Private Equity Real Estate experience includes working on The Recording Academy’s (The Grammys) deal to develop Grammy Museums in China, a public/private deal to finance an office building in Delhi, India; the acquisition of hotels in Bangkok by a large Japanese institutional investor and a joint venture between a Hong Kong developer and an Asian based private equity fund for the acquisition and redevelopment of a property in Kowloon into a mixed use property including co-living and co-working properties.

Yuval is a member of the Steering Committee of the Asian Hospitality Development Council of the Urban Land Institute (ULI) and has recently been appointed to the Law 360 2020 Hospitality Editorial Board. He is a regular speaker at real estate and hospitality related conferences such as the Hotel Investment Conference Asia-Pacific in Hong Kong.

Prior to rejoining Proskauer in 1999, Yuval practiced law in Israel, representing Israeli clients in transactions in Europe and the United States and European and U.S.-based clients in transactions in Israel. He handled transactions for major publicly traded Israeli companies such as Clal (Israel) Ltd., LifeWatch, Kitan Consolidated Ltd., Orckit Communications Ltd., ECI Telecom Ltd., Scitex Corporation Ltd. and Tecnomatix Technologies Ltd. Since joining Proskauer, Yuval has continued to represent Israeli clients on a wide range of corporate and securities matters.

Photo of Jeffrey A. Horwitz Jeffrey A. Horwitz

Jeffrey A. Horwitz is a partner in Proskauer’s Corporate Department where he co-heads our Private Equity Real Estate practice and runs our internationally recognized Hospitality, Gaming & Leisure Group. He also has served as co-head of Mergers & Acquisitions and as a member

Jeffrey A. Horwitz is a partner in Proskauer’s Corporate Department where he co-heads our Private Equity Real Estate practice and runs our internationally recognized Hospitality, Gaming & Leisure Group. He also has served as co-head of Mergers & Acquisitions and as a member of our Executive Committee. Jeff is a general corporate and securities lawyer with broad-based experience in mergers and acquisitions, cross-border transactions, and long-term joint ventures. He is regularly engaged to advise boards, management teams and investors on strategic matters, from litigation to personnel to transactions. Jeff is also the head of the Firm’s cross-disciplinary, cross-jurisdictional Coronavirus Taskforce helping to shape the guidance and next steps for clients impacted by the pandemic.

Jeff counsels clients on the full range of their activities, from seed capital to public offerings, acquisitions and operational matters, often acting as outside general counsel. He represents major financial institutions, sovereign wealth funds, private equity and family offices in sophisticated financial and other transactions. He represented Merrill Lynch Global Private Equity in connection with its equity participation in the $33 billion acquisition of HCA in what was then the largest LBO ever. He has handled deals aggregating nearly $200 billion in value, including tender offers, “going-private” transactions, IPOs, restructuring and structured finance transactions, and mergers and acquisitions in industries as diverse as biotechnology and aerospace, retail and cable television, and education and scrap metal. He regularly handles transactions outside the U.S., including Europe, the Middle East, Asia, Latin America, Australia, South Africa and India.

Leading our Private Equity Real Estate group, he works with a team of 75 lawyers from across the firm advising on complex transactions and disputes relating to real estate, and particularly hotels. Jeff has handled virtually every type of matter, and has worked with virtually every major player in these industries, including transactions for nearly 3,500 hotels comprising more than 275,000 rooms and involving more than $12 billion. His experience, both in and outside the U.S., extends to hotel and casino development and construction; portfolio and single-property acquisitions; sales and restructurings; financings; management; marketing; reservations systems; litigation counseling and strategic planning; and ancillary services. This breadth of work is key to executing complex and sophisticated transactions, such as the $2.9 billion acquisition of Fairmont Raffles by AccorHotels and its investments in Huazhu, Banyan Tree Hotels & Resorts, Brazil Hotel Group, sbe Entertainment and 21c Museum hotels, among others.

As a senior member of our Entertainment Group, Jeff represents The Broadway League (the national trade association for Broadway theatre), the Tony Awards®, and various other joint venture events and producers. In the media industry, Jeff has advised on the acquisition and sale of television, radio, newspaper and magazine properties, and the acquisition and sale of advertising, promotion and marketing agencies, and related joint ventures. He also advises rights holders, including our long-time clients The Leonard Bernstein Office and The Balanchine Trust. He leads our team representing TSG Entertainment in film-slate financing deals.

Jeff also frequently represents start-up and development-stage companies, as well as established “traditional” businesses, in online, Internet-related or technology businesses. He has handled organizational and structuring matters, venture capital and other equity placements, restructurings (from “down” rounds to recapitalizations to M&A solutions). He has both company-side and investor experience.

As a frequent speaker at real estate and hospitality events, Jeff regularly presents about hotel management agreements at The Hotel School at Cornell’s SC Johnson College of Business, NYU’s Jonathan M. Tisch Center of Hospitality, and on M&A and investment matters at lodging investment conferences around the world, including the NYU Hospitality Industry Investment Conference in New York, Americas Lodging Investment Summit in Los Angeles, the International Hotel Investment Forum in Berlin and the Hotel Investment Conference Asia-Pacific in Hong Kong.

Jeff is a member of the American Hotel & Lodging Association (AHLA) Hospitality Investment Roundtable, ULI (and its Hotel Development Council) and the Advisory Board of the Cornell Center for Real Estate and Finance and has served as a member of the Editorial Board of the Cornell Hotel and Restaurant Administration Quarterly and a member of the Advisory Board of the Cornell Center for Hospitality Research. He is a director of The New York Hospitality Council, Inc., a not-for-profit forum for hospitality industry leaders, and is a member of the Real Estate Capital Policy Advisory Committee of The Real Estate Roundtable. He also has served as a director of the America-Israel Chamber of Commerce, and as a member of the French-American Chamber of Commerce in the U.S. and the American Society of Corporate Secretaries. He was the Chairman of the Board of Labyrinth Theater Company and a director of The Jewish Community Center in Manhattan for more than 15 years, a member of the Executive Committee of the Lawyers’ Division of UJA-Federation for more than five years and an officer of the Henry Kaufmann Foundation for more than a dozen years. He currently serves as Chairman of the Board of The American Playwriting Foundation and Building for the Arts and is a member of the Board of Directors of StreetSquash and The George Balanchine Foundation. He also served as a Vice Chair of the Associates’ Campaign for The Legal Aid Society.

Jeff has been with the firm for his entire career and lives in Manhattan and Connecticut.

Photo of Andrew Bettwy Andrew Bettwy

Andrew Bettwy is a partner in the Corporate Department and co-head of the Finance Group. His principal focus is the representation of financial institutions, private equity sponsors, and public and privately held companies in leveraged finance and other financing transactions. Andrew represents both…

Andrew Bettwy is a partner in the Corporate Department and co-head of the Finance Group. His principal focus is the representation of financial institutions, private equity sponsors, and public and privately held companies in leveraged finance and other financing transactions. Andrew represents both lenders and borrowers in a wide range of transactions involving multiple industries and diverse debt capital structures, including acquisition financings, recapitalizations, multiple lien and subordinated debt financings, debtor-in-possession and exit financings, and private placements.

Andrew has represented several leading financial institutions while at Proskauer, including Bank of America, Citibank, CoBank, Credit Suisse, Imperial Capital, Jefferies Finance and Lazard Capital Markets.

Andrew is co-chair of Proskauer’s CARES Act Team and a part of the Firm’s cross-disciplinary, cross-jurisdictional Coronavirus Taskforce helping to shape the guidance and next steps for clients impacted by the pandemic.

Photo of Sarah Hughes Sarah Hughes

Sarah Hughes is an associate in the Corporate Department and a member of the Private Equity and Mergers & Acquisitions Groups. Sarah counsels clients in connection in both domestic and cross-border buyouts, mergers, acquisitions, divestitures, joint ventures, and recapitalizations. She has represented clients…

Sarah Hughes is an associate in the Corporate Department and a member of the Private Equity and Mergers & Acquisitions Groups. Sarah counsels clients in connection in both domestic and cross-border buyouts, mergers, acquisitions, divestitures, joint ventures, and recapitalizations. She has represented clients across various industries including banking, securities regulation, broker-dealers, health care, infrastructure, telecommunications, real estate, and environmental.

In addition to her legal practice, Sarah is actively involved and passionate about numerous not-for-profit causes. Sarah does pro bono work for the Lawyers Committee for Civil Rights and has advised pro bono clients such as Right to Play USA, an international non-profit organization that empowers vulnerable children to overcome the effects of war, poverty, and disease around the world through play. She currently serves as a Trustee for the Women’s Sports Foundation, was a member of the U.S. Delegation to the 2018 Olympic Games, and was a featured speaker alongside Secretary-General Ban ki-Moon at the United Nations.

Sarah earned her J.D. from the University of Pennsylvania Law School, where she was a senior editor of the Journal of Business Law and received the Distinguished Pro Bono Service Award. While at Penn, she also worked as a judicial intern for the Honorable Lewis A. Kaplan at the United States District Court for the Southern District of New York.

Sarah has a B.A. from Yale University and an honorary Doctor of Humane Letters from Niagara University.