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COVID-19 Emergency Funding Solutions

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Riding the wave of the longest bull market in U.S. history, and in a growing field of available institutional capital, funding options under company-friendly terms were the norm until a few weeks ago. With the spread of the novel coronavirus (COVID-19) circumstances have dramatically changed. Consequently, with respect to funding, companies should consider the following recommendations to manage the uncertainty that will presumably exist for some period of time:

  1. Companies with existing banking relationships should proactively contact their relationship manager to discuss how the pandemic is affecting their businesses and how they are managing any adverse impacts. Many banks are willing to be more flexible than they might otherwise be, particularly given the recent decreases in interest rates but keeping open lines of communication is critical.
  2. Companies should utilize existing lines of credit to mitigate short-term cash-flow issues.
  3. If no lines of credit exist, companies must identify other options with financial institutions.
  4. Additionally, there are potential opportunities for companies to obtain disaster relief funding from the Small Business Administration (SBA):
    • The SBA’s Economic Injury Disaster Loan Program (EIDL) can potentially provide small businesses financially impacted by COVID-19 loans of up to $2 million at interest rates of 3.75% per annum (2.75% for non-profit companies).
    • The term may extend up to 30 years subject to a company’s financial condition.
    • EIDLs exceeding $25,000 will require collateral including any owned real estate.
    • Companies who receive an EIDL can use funds for working capital: (i) payment of fixed debts, (ii) payroll, and (iii) other accounts payable. But these funds cannot be used for (a) expansion/replacement of lost sales/profits, (b) refinancing debt, or (c) equity buybacks/dividends.
    • Companies can apply for an EIDL at
    • Applicants aren’t charged application fees nor are they required to accept an EIDL
    • Companies should be cognizant of corporate governance provisions in their respective organizational documents, and any other equityholder agreements, to confirm whether accepting an EIDL requires approval from any stakeholders.

While it is not clear when things will return to “normal”, there are options available for companies that need assistance. We will continue to monitor additional programs as legislation is passed and will update accordingly. Please do not hesitate to reach out with any questions.

This advisory was prepared by Shannon Zollo, Josh French, Phil Rosenblatt, and Steve Patterson. For more information, please contact one of the authors or your Nutter attorney at 617.439.2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising. 

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