With small businesses and nonprofits in desperate need of quick cash due to the COVID-19 pandemic, employers starting Friday can apply for federal loans with one crucial feature: the loans can be converted into grants whether the money is used to keep workers on the payroll.
The financial lifeline, which will be managed by the Small Business Administration, aims to keep employers in business and workers to be paid.
New $ 349 billion “Paycheque Protection Program” underway the $ 2.2 trillion coronavirus relief and economic security law was enacted last Friday.
President Donald Trump said on Tuesday that banks can start accepting applications for the Small Business Administration program on Friday.
Illinois has been on lockdown for almost two weeks – with more weeks to come. Jobs are evaporating and cash flow to employers is minimal or has already disappeared.
According to Treasury Department guidelines released on Tuesday, banks will move at breakneck speed, so applications will be “approved same day.” Loans guaranteed by the SBA will be canceled as long as the funds are used to keep employees on the payroll and for certain other expenses. “
Money can at least buy time as COVID-19 spreads. Here are the details released by the Treasury Department on Tuesday:
• This is the most crucial element and bears repeating. “The SBA will write off the portion of the loan proceeds that is used to cover the first eight weeks of salary costs, rent, utilities, and mortgage interest.”
• Another very important feature. Loans can be retroactive from February 15, 2020, “so employers can rehire their recently laid-off employees until June 30, 2020”.
• The intention is to allow this money to flow to all kinds of troubled entities. Businesses, non-profit organizations, veterans organizations, sole proprietorships, self-employed workers and independent contractors. For the most part, the main criteria for eligibility is to have 500 employees or less.
• Loans are available from banks or credit unions that are SBA lenders.
• All loan payments will be deferred for six months.
• And if the money remains a loan, the interest will be 0.5%
• The overwhelming need to keep employers above water means that loans will be made without any collateral or personal collateral required.
• The SBA will not charge a borrower or lender a fee.
• The maximum loan is $ 10 million.
An Analysis of Federal Relief Legislation by Illinois Senses Dick Durbin and Tammy Duckworth, both Democrats, noted that it also contained $ 17 billion for the SBA to “cover six months of loan payments. Existing SBAs ”.
• More information and the app can be found at SBA.gov/Coronavirus.
Another way to maintain cash flow to paychecks is to give employers federal tax relief.
The Treasury Department said on Tuesday that payment of excise duties may be delayed for wine, beer, distilled spirits, tobacco and other products “adversely affected by COVID-19”.
ILLINOIS STATE SMALL BUSINESS ASSISTANCE
Illinois small business owners and nonprofits now have state and federal options for quick emergency financial assistance.
The state defines a small business as having less than $ 1 million in liquid assets or $ 8 million in average annual revenue.
The Illinois state relief plan, the COVID-19 Illinois Small Business Relief Program, is managed by the state treasurer’s office. It will inject $ 250 million in deposits in financial institutions across the state at rates close to zero.
Through this program, the Treasurer’s Office is working with Illinois financial institutions to provide low-rate loans to a business or nonprofit that would otherwise not qualify – to deal with the pandemic growing number of COVID-19.
More information can be found at https://www.illinoistreasurer.gov/Invest_in_Illinois/Small_Business_COVID-19_Relief_Program
State Treasurer Michael Frerichs told the Chicago Sun-Times: “Our plan is to complement what the federal government is doing. ”
AID TO SMALL BUSINESSES IN THE CITY OF CHICAGO
The city of Chicago has established the $ 100 million low interest Chicago Small Business Resilience Fund. The city said in a statement, “The fund will provide immediate stopgap for thousands of small businesses in Chicago. Interested business owners can start applying for the loans at: www.chicagoresiliencyfund.com. “
Funding comes from a capital commitment of up to $ 50 million from the Catalyst Fund; a $ 25 million grant from the City of Chicago, as well as $ 10 million from Goldman Sachs’ urban investment group, $ 1 million from Fifth Third, $ 250,000 from Clayco, and $ 15 million from sources additional private funding.
Who is Eligible: “Five-year loans of up to $ 50,000 are available today for Chicago small businesses and nonprofits with annual revenues of less than $ 3 million that have suffered a decline. of at least 25% of their income due to the COVID-19 outbreak. . To be eligible, companies must employ less than 50 employees. The loan proceeds must be used for working capital with at least 50 percent of the proceeds applied to payroll. The fixed annual interest rates on the loan will be 1% for the first 18 months, with nominal payments during the first 6 months.