On June 17, 2020, Governor Andrew Cuomo signed into law Chapter 109 of the Laws of 2020, the latest piece of legislation aimed at alleviating the economic damage that both small businesses and not-for-profit corporations have experienced as a result of the novel COVID-19 pandemic.
S8181A amends certain sections of the General Municipal Law (“GML”) by providing industrial development agencies (“IDAs”) throughout New York State with the ability to provide financial assistance in the form of loans and/or grants to eligible entities.
Overview of S8181A
S8181A amends § 858 and adds new § 859-c to the General Municipal Law. The legislation helps to ensure the short-term viability of both small businesses and not-for-profit corporations by allowing IDAs to:
- Provide grants to small businesses and not-for-profit corporations for the purpose of acquiring PPE and/or installing fixtures necessary to prevent the spread of COVID-19; and
- Make loans, through the administration of a state disaster emergency loan program, to small businesses and not-for-profit corporations.
General Eligibility Requirements
To qualify for either a grant or loan, an eligible entity must establish that it:
- Was a financially viable entity prior to March 7, 2020 (the date on which Gov. Andrew Cuomo signed Executive Order 202 declaring a disaster emergency);
- Conducts business in the area served by the IDA; and
- Has been negatively impacted by COVID-19.
A Review of the Specifics
Grants: The legislation enables IDAs to provide grants to small businesses and not-for-profit corporations in an amount not to exceed $10,000, the proceeds of which must be used to acquire personal protective equipment or install equipment necessary to prevent the spread of COVID-19.
State Disaster Emergency Loan Program: IDAs are now permitted, through the administration of a state disaster emergency loan program and throughout the period in which the state disaster emergency declaration remains in effect, to provide loans to small businesses and not-for-profit corporations in an amount up to $25,000. Deferred and/or uncharged interest shall be exempt from New York State taxation.
Prior to administering a state disaster emergency loan program, an IDA shall develop and adopt, by resolution, the terms and conditions of the loan, subject to the following:
- An IDA shall not require repayment during the sixty (60) day period following the end of the state emergency disaster (the “grace period”);
- Interest shall not be charged on the principal amount of the loan;
- There shall be no fee or penalty for the prepayment of the loan; and
- Applicants must repay the loan in full no later than one (1) year at the end of the grace period.
When reviewing an application, an IDA shall take into consideration the following as it relates to the applicant: (1) its creditworthiness prior to March 7, 2020; (2) the negative impact the shutdown has had on its operations and finances; (3) how it plans to use the funds; (4) ties to the applicable community and the applicant’s impact on the area served by the IDA; (5) assurance that efforts will be made to retain jobs during the time at which Executive Order 2020 remains in effect; and (6) other sources of funding available.
IDAs that choose to administer a state disaster emergency loan program are charged with certain reporting and record retention obligations, including the following:
- IDAs shall maintain records of loans issued and payments received, and include such information in its annual report
- One (1) year after the state emergency disaster ends, IDAs shall submit a report, which shall contain, among other things: (1) the number and aggregate amount of loans provided; report containing such information shall be submitted to the Governor, the Speaker of the Assembly, and the Temporary President of the Senate.
IDAs that serve overlapping jurisdictions are required to coordinate the distribution of loans made pursuant to a state disaster emergency loan program.
This alert does not purport to be a substitute for advice of counsel on specific matters.
Harris Beach has offices throughout New York State, including Albany, Buffalo, Ithaca, Long Island, New York City, Rochester, Saratoga Springs, Syracuse and White Plains, as well as New Haven, Connecticut and Newark, New Jersey.