CARES Act Opportunities for Israeli Companies With U.S. Operations

April 14, 2020Alerts

The CARES Act, signed into law on March 27, is the U.S. government’s attempt to jump-start the U.S. economy in light of the COVID-19 pandemic by providing $2.2 trillion in economic stimulus funds. A company does not have to be registered as an American company to apply for loans and grants under the CARES Act. Any business that operates and employs workers in the U.S. can do so. Sole proprietors, independent contractors and self-employed-individuals may qualify.

A key program of the CARES Act relevant to Israelis is the Paycheck Protection Program (PPP). This program provides eight weeks of assistance in the form of 100% federally guaranteed loans to small businesses at 1% interest, is based on government collateral and is repayable within two years — for the unforgiven portion — with a six-month grace period before payments are due. If the borrowers meet certain conditions related to maintaining payroll continuity, up to 100% of PPP loans may be forgiven.

The law provides that a company operating in the U.S. with fewer than 500 employees may be eligible to receive a loan of up to 2.5 times its payroll cost, up to a $10 million maximum. An Israeli company with a U.S. subsidiary or branch in the U.S. that has U.S. payroll may qualify, for example. PPP loan proceeds can be used only for payroll costs, interest on mortgage obligations, rent, utilities and interest on other debt obligations incurred before the covered period.

It is typical for many Israeli companies to do research and development in Israel but to have a branch or subsidiary in the U.S. to handle marketing and sales. Many high-tech companies form sister companies in the U.S. when they are ready to go to market. All of these companies should consider applying for CARES Act relief, and in most cases they are likely to qualify.

The PPP is administered by the U.S. Small Business Administration (SBA). In order to handle the huge volume of applications, the SBA has contracted with many local, regional and national banks. Businesses submit applications to participating banks that vet the applications and make a recommendation for approval or denial to the SBA. This approach is intended to enable the SBA to turn around applications as quickly as possible.

Israeli companies that qualify for assistance are encouraged to take advantage of the CARES Act as quickly as possible while funds are still available. Pick up the phone and get your application in today.

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