In response to the economic injury that small businesses (and individuals) have experienced and continue to experience as a result of the COVID-19 pandemic and the response thereto, the federal government is providing SBA Economic Injury Disaster Loans (“EIDL”) and the New York Attorney General is suspending debt collection activities. These federal and state relief efforts may provide significant financial relief to our small business clients as a result of COVID-19. Additionally, Executive Order 202.5 authorizes corporations to take action electronically, in order to facilitate formal corporate actions during the COVID-19 public health emergency. Below are details about each of the foregoing government programs and actions for your consideration in determining the next steps your business should take.
SBA Economic Injury Disaster Loan (EIDL) Program[1]
Under the EIDL program, disaster relief loans are available to small businesses and private, non-profit organizations throughout New York State that suffer economic injury from the COVID-19 pandemic. The SBA’s definition of “small business” looks to the number of employees and average annual revenue of a business, but specific amounts vary between industries. These loans are intended to assist small businesses in maintaining reasonable working capital, which will permit them to continue to pay expenses such as fixed debts (payments that come due during this period, but not refinancing long-term debts), accounts payable, payroll and other bills, that these businesses would have been able to meet had the pandemic not occurred.
Generally, eligible small businesses may obtain loans of up to $2 million, bearing fixed interest at 3.75%, with a maximum term of 30-years. The actual amount of each loan is limited to the economic injury determined by the SBA. Loans are available to small businesses only when SBA determines they are unable to obtain credit elsewhere. In determining the loan amount, the SBA will consider whether potential contributions are available from the business, its affiliates, and its owners, and business interruption insurance.
To be eligible for an EIDL, an applicant must be a small business as defined by the SBA. An applicant must also have a credit history acceptable to SBA and show the ability to repay the loan. An applicant that has not complied with the terms of a previous SBA loan may be ineligible for an EIDL. Additionally, for loans over $25,000, collateral is required.
Loans will be made on a case-by-case basis; however, any small business client that will struggle to meet their payroll and similar obligations due to COVID-19, and meet the eligibility requirements, should apply for these loans if other credit is not available.
To determine if your business qualifies as a small business for the EIDL program, visit the SBA website.
New York Attorney General Suspension of Debt Collection Program
Individuals and businesses that have been financially impacted by the COVID-19 pandemic may apply for temporary relief from debt collection and litigation activities conducted by the Attorney General (AG). This relief program should be considered for clients whose debt(s) to the state are overdue and being enforced by the AG.
Relief that may be provided under this program includes temporarily waiving pre-judgment interest and collection fees, including interest and collection fees under the State Finance Law, and post-judgment interest that accrues under Civil Practice Law & Rules (C.P.L.R.) on filed judgments; the decertification of debts from the Statewide Offset Program which intercepts tax refunds and contract payments to debtors; tolling time periods for applying interest and collection fees under the State Finance Law; ceasing enforcement actions for accounts in judgment; and postponing payments due to, or modifying payment agreements with, the AG.
An applicant must provide the AG with information about the impact COVID-19 has had on the applicant or their business, including specific information and documentation that demonstrates a material financial impact. No further information or guidance as to applicant eligibility and factors that will be considered in approving these applications has yet been published. The application is online.
Executive Order 202.5: Suspension of Section 708(b) of the Business Corporation Law
Executive Order 202.5 temporarily suspends 708(b) of New York Business Corporation Law “to the extent necessary to permit business corporations to take any action otherwise permitted under that section with the electronic consent of the members of the board or committee, when such consent is submitted via electronic mail along with information from which it can reasonably be determined that the transmission was authorized by such member.”
Previously, unless a corporation had in its certificate of incorporation or bylaws a provision that allowed the board or a committee to “take action” (that is, vote) without a meeting, the corporation would have to hold a meeting – in person or by telephone or other electronic means (if the latter was permitted in the bylaws; if not, then an in-person meeting was necessary).
This order now allows corporations to take action by “unanimous written consent” done by emails sent by each director or committee member. The email must clearly indicate who the sender is (so, for example, if someone has a “funky” email address that doesn’t clearly identify the sender, that person would be need to type in their name, too).
As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.
You can view more COVID-19-related posts in our COVID-19 Resource Area here.
[1] Fact Sheet, New York Declaration 164346; https://disasterloan.sba.gov; https://www.benefits.gov/benefit/1504