Capstone Turbine Corporation (NASDAQ:CPST) announced Wednesday that it has received a $2.6 million small business loan through the Paycheck Protection Program put in place by the Coronavirus Aid, Relief and Economic Security (CARES) Act.
The microturbine producer said it put in place a business continuity plan (BCP) on March 24 amid the coronavirus (COVID-19) pandemic, under which it furloughed, reduced hours or reduced pay for 70% of its workforce. Additionally, the company’s CEO and other executive staff took a temporary 25% cut, and other managers took a 15% cut.
The loan was entered into with Capstone’s banking partner, Western Alliance Bank, on April 24.
"We appreciate the federal government's commitment in supporting small businesses through the Paycheck Protection Program, along with Western Alliance Bank for their swift and efficient work to get us the appropriate funding during this unprecedented time," Capstone CEO Darren Jamison said in a statement.
"During these times of uncertainty that the COVID-19 pandemic has created for nearly every business, having the additional liquidity provided by the PPP enhances our ability to continue manufacturing products and providing aftermarket services for our customers, which includes our global distribution network which is largely comprised of 62 small businesses, across 73 countries,"
The proceeds of the loan are expected to cover payroll costs, rent and utilities. The loan’s term is two years and it bears interest at a rate of 1% annually, although it could be partially or even fully forgiven if at least 75% of the forgiven amount has been used for payroll costs. Forgiveness is based on the company maintaining or quickly rehiring employees and maintaining acceptable salary levels, the company said.
"A key strategic goal of the company's business continuity plan in response to COVID-19 was to maintain cash flow and liquidity, and having this $2.6 million PPP loan in place from the [Small Business Administration] in combination with the furloughs, pay cuts and the dramatic slowing of incoming raw material are essential to keep the company liquid and allow us to maintain our support of Capstone's essential critical infrastructure end-use customers," CFO Eric Hencken said.
The company emphasized that it will continue to support its long-term service contracts and spare part deliveries to its essential critical infrastructure customers in energy, health care, wastewater treatment, food processing, pharmaceuticals and other industries, while keeping its employees safe.
Contact Andrew Kessel at [email protected]
Follow him on Twitter @andrew_kessel