Rare Unanimous Action by the NC General Assembly Offers Lifeline for Small Business

This week, both houses of the North Carolina General Assembly unanimously passed two bills which provide over $1.6 Billion in COVID-19 relief. The bills were signed by Governor Cooper on Monday, May 4. While the bulk of both laws concerns government spending and changes to the government’s operations during the pandemic, there is one particular provision that could give a needed lifeline for small businesses struggling to survive.

The 2020 COVID-19 Recovery Act provides $125 Million in additional funding for the Golden LEAF Foundation’s Rapid Recovery for Small Business program. The program had previously lent $15 million before running out of funds in March. With the additional $125 Million, Golden LEAF can provide funds for “emergency loans to assist small businesses with business needs during periods of economic hardship occasioned by the COVID-19 pandemic.” The General Assembly requires Golden LEAF to ensure program lenders provide assistance to borrowers in applying for federal assistance, and requires that the Foundation and its lenders work with programs that focus on underutilized businesses to make sure that all businesses in North Carolina know about the program.

Golden LEAF Rapid Recovery Loans will come with a six month deferral period with no payments and will carry interest rates of 4% for six months, and then 5.5% thereafter. The terms of the loans are not to exceed 66 months. The loans are capped at $50,000 per qualifying business. To qualify, a business must certify in writing that it “will use a loan provided under the program for employee compensation, mortgage, rent, utilities, and other operating costs and expenses incurred on behalf of a business located in this State.”

The borrower will be required to first repay the loan with any federal assistance it receives that duplicates the benefits of the loan, so long as such repayment does not disqualify or impair the federal assistance. The proceeds of the loan must be secured by a UCC Financing Statement, and the funds can be recovered if the borrower does not comply with the requirements of the program.

Currently, the Golden LEAF Foundation requires personal guarantees from any individual with greater than a 20% ownership in a qualifying business, and caps Rapid Recovery loans at the lesser of two months of business income or $50,000. While the new statute does not discuss these requirements, it can be assumed that they will remain in place.

Many businesses have reported difficulty obtaining loans through the SBA Paycheck Protection Program (“PPP”), with banks overloaded by applications and funding exhausted before many applications were even received. While the terms of these Golden LEAF loans are not as generous as the 1% interest PPP loans and cannot be forgiven and converted to grants, they do have longer repayment terms and are being advanced through a stable, existing program which has previously assisted businesses in North Carolina. Unlike the PPP loans, the Golden LEAF Rapid Recovery Loans are available only to small businesses and family farms and not to nonprofit organizations.

North Carolina-based businesses with losses due to the crisis, particularly those that have had difficulty accessing the PPP Loan, should certainly look into the Golden LEAF Rapid Recovery Loan program. Applications can be submitted through the Golden LEAF Foundation website at https://ncrapidrecovery.org/Contact Forrest Firm’s attorneys if you have any questions about this program or any other COVID-19 challenges your business may be facing.