Are You A Part 135 Air Carrier? It’s Not Too Late To Receive Federal Aid (If You Act Quickly)
The Paycheck Protection Program (“PPP“) loan funds may no longer be available, but if you are a Part 135 charter operator or other eligible aviation business you may still be able to receive federal funding from other programs permitted by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act“).
Section 4003 of the CARES Act authorizes the U.S. Department of Treasury (“Treasury“) to make loans up to $25 billion available for eligible businesses described below, subject to appropriate covenants, warranties, and requirements to provide liquidity related to losses incurred as a result of coronavirus (“COVID-19“).
Businesses that are eligible for these loans from the Treasury include:
- (a) passenger air carriers (including Part 135 air carriers);
- (b) cargo air carriers;
- (c) eligible businesses that are certified under 14 CFR part 145 and approved to perform inspection, repair, replacement, or overhaul services; and
- (d) ticket agents as defined in 49 U.S.C. § 40102.
According to recent guidance, the application deadlines for this loan program have been extended by Treasury. In order to receive approval of applications as soon as possible, an applicant should submit its completed application materials no later than 5:00 p.m. EDT on April 17, 2020. Applications received after 5:00 p.m. EDT on April 17, 2020, will be considered but may not receive approval as quickly. Applications received after 11:59 p.m. EDT on April 30, 2020, may not be considered, but Treasury may, in its discretion and subject to the availability of funds, consider such applications for approval.
Here are the top 10 things you need to know about this loan program:
- To be eligible, the borrower must have incurred or expect to incur covered losses such that the continued operations of the business are jeopardized.
- While PDFs of the loan application forms are available, applications should be made directly to the Treasury through the online application process.
- This loan program is not eligible for forgiveness. This means that borrowers will need to repay the full amount of the loan.
- The loan term will be as short as practicable, but not longer than 5 years.
- The interest rate is yet to be determined and will reflect the risk of the loan based on market conditions prior to COVID-19.
- Collateral will be required. There is little guidance available as to the extent of the collateral that the Treasury will require.
- The borrower may likely be required to pledge or warrant an equity interest in the company to the Treasury. NATA and NBAA have requested clarification on how these pledges or warrants might work with privately-owned companies, but there is no official guidance at this time.
- There must be “no credit elsewhere” for the borrower – meaning, credit is not reasonably available to the borrower at the time of the transaction by any other means.
- The borrower must maintain 90% of its employment levels from March 24, 2020, through September 30, 2020.
- The borrower must limit certain employee compensation of highly paid company officers, executives, and owners.
Section 4003 is not going to be helpful to all eligible participants. But if you are eligible and uncertain, you risk nothing by applying for the loan. If Treasury determines a loan is available to you, you can decide to accept or reject it once it is awarded.
If you are a Part 135 operator or maintenance facility looking for opportunities for federal assistance, you may want to consider applying for this loan program. The FMJ team is prepared and available to assist you with your applications or your other finance needs.
If you have questions about the above article or specific questions about this loan program, please contact attorneys Jordanne Kissner at firstname.lastname@example.org or Kevin Johnson at email@example.com.