Summary of Small Business Financing Solutions Under COVID-19-Related Government Programs
Steven A. Migala and Nataly Kaiser • April 6, 2020
In the wake of the COVID-19 pandemic, various federal, state and local resources have been made available to help support small businesses. Below is a summary of the aid and financing options currently available.
FEDERAL PROGRAMS
Paycheck Protection Program.
The Paycheck Protection Program (“PPP”) is a nearly $350-billion program in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act intended to provide American small businesses with eight weeks of cash-flow assistance through 100 percent federally guaranteed loans. The program is to be managed through the U.S. Small Business Administration (“SBA”). A portion of the loans qualifies for forgiveness if all requirements are met. To learn more about this program, see our article “Summary of Small Business Loans under the CARES Act” available at https://www.lavellelaw.com/summary-of-small-business-loans-under-the-cares-actd3b70276.
Disaster Relief Lending.
Earlier in March, the SBA was apportioned an additional $20 million for the “Disaster Loans Program Account” under the Coronavirus Preparedness and Response Supplemental Appropriations Act. Similar to the PPP loans discussed above, these low-interest federal disaster loans are for small businesses suffering substantial economic injury as a result of COVID-19. Disaster Relief loans may be used to pay fixed debts, payroll, accounts payable and other bills that cannot be paid because of the disaster’s impact. To learn more about SBA Disaster Relief Lending, visit https://www.sba.gov/funding-programs/disaster-assistance.
Emergency EIDL Grants. The CARES Act contains a provision expanding the Disaster Loan program to include an Emergency Economic Injury Disaster Loan (“EIDL”) grant of up to $10,000.00. The grant is issued as an advance on a disaster loan application and may be issued within three (3) days of making the request to the SBA administrator. Applicants are not required to repay any amount of the grant, even if it is later determined that they are not eligible for the disaster loan under Section 7(b)(2) of the Small Business Act. This advance grant requires the applicant to submit a verification statement under penalties of perjury that the applicant is an eligible entity. To learn more about EIDLs, visit https://www.sba.gov/funding-programs/disaster-assistance.
STATE AND LOCAL PROGRAMS
Chicago Small Business Resiliency Fund.
Last month, Chicago Mayor Lori Lightfoot launched the Chicago Small Business Resiliency Fund, a $100 million program that will help provide certain small businesses with emergency cash flow to support rent and payroll expenses. To be eligible, a business must be an “Illinois Small Business” (fewer than 50 employees and gross revenues of less than $3 million in 2019) and must have suffered more than a 25% revenue decrease due to COVID-19. Eligible businesses can start the process by completing an interest form, after which they will be contacted for next steps. The admitted aim of the resiliency fund is to assist the most severely impacted businesses. To learn more, visit https://www.chicago.gov/content/dam/city/depts/mayor/Press%20Room/Press%20Releases/2020/March/SmallBusinessReliefPackage.pdf.
Hospitality Emergency Grant Program.
This $14 million program is managed through the Illinois Department of Commerce & Economic Opportunity (“DCEO”) to provide grants to the hospitality industry, including bars, restaurants, hotels, motels and other lodging establishments. Bars and restaurants with less than $500,000 in annual revenue for 2019 can receive up to $10,000. Bars and restaurants with annual revenue for 2019 between $500,000 and $1 million can receive up to $25,000. Hotels with less than $8 million in annual revenue can receive up to $50,000. The funds may be used to support working capital (rent, payroll and other accounts payable), job training and technology for new operations, or to retain employees. Grant awards will be decided by a lottery with applications accepted until 5 p.m. on April 1, with recipients notified on April 4 and funds made available hopefully within two days. To learn more, visit https://www2.illinois.gov/dceo/SmallBizAssistance/Pages/EmergencySBAIntiatives.aspx.
Illinois Small Business Emergency Loan Fund.
Established by the DCEO and the Illinois Department of Financial and Professional Regulation, eligible small businesses can apply for low-interest loans (3% simple interest) of up to $50,000. Payments on the five-year loans are deferred for the first six months. Official loan applications will be accepted starting April 1. Loan proceeds can be used for working capital but at least 50% of the loan proceeds must be applied toward payroll or other eligible compensation such as salaries, wages, tips, paid leave and group health care costs. To learn more, visit https://www2.illinois.gov/dceo/SmallBizAssistance/Pages/EmergencySBAIntiatives.aspx.
Downstate Small Business Stabilization Program.
The focus of this DCEO program is the support of small businesses in downstate and rural counties. Businesses have an opportunity to partner with their local government — counties, cities, and villages — provided the local government is not already a recipient of entitlement funds. Businesses can receive grants up to $25,000 for working capital. Applications should be available soon on the DCEO website, and funds are expected to be accessible within 30 days of the receipt of the application. To learn more, visit https://www2.illinois.gov/dceo/SmallBizAssistance/Pages/EmergencySBAIntiatives.aspx.
If you have any questions about these government programs and financing options, contact Steve Migala at smigala@lavellelaw.com
or 847-705-7555.
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