(Source: U.S. Senate Committee on Small Business and Entrepreneurship)
Where can I apply for the Paycheck Protection Program?
You can apply for the Paycheck Protection Program (PPP) at any lending institution that is approved to participate in the program through the existing U.S. Small Business Administration (SBA) 7(a) lending program and additional lenders approved by the Department of Treasury. This could be the bank you already use, or a nearby bank. There are thousands of banks that already participate in the SBA’s lending programs, including numerous community banks. You do not have to visit any government institution to apply for the program. You can call your bank or find SBA-approved lenders in your area through SBA’s online Lender Match tool. You can call your local Small Business Development Center or Women’s Business Center and they will provide free assistance and guide you to lenders.
Who is eligible for the loan?
You are eligible for a loan if you are a small business that employs 500 employees or fewer, or if your business is in an industry that has an employee-based size standard through SBA that is higher than 500 employees. In addition, if you are a restaurant, hotel, or a business that falls within the North American Industry Classification System (NAICS) code 72, “Accommodation and Food Services,” and each of your locations has 500 employees or fewer, you are eligible. Tribal businesses, 501(c)(19) veteran organizations, and 501(c)(3) nonprofits, including religious organizations, will be eligible for the program. Nonprofit organizations are subject to SBA’s affiliation standards. Independently owned franchises with under 500 employees, who are approved by SBA, are also eligible. Eligible franchises can be found through SBA’s Franchise Directory.
I am an independent contractor or gig economy worker, am I eligible?
Yes. Sole proprietors, independent contractors, gig economy workers, and self-employed individuals are all eligible for the Paycheck Protection Program.
What is the maximum amount I can borrow?
The amount any small business is eligible to borrow is 250 percent of their average monthly payroll expenses, up to a total of $10 million. This amount is intended to cover 8 weeks of payroll expenses and any additional amounts for making payments towards debt obligations. This 8 week period may be applied to any time frame between February 15, 2020 and June 30, 2020. Seasonal business expenses will be measured using a 12-week period beginning February 15, 2019, or March 1, 2019, whichever the seasonal employer chooses.
How can I use the money such that the loan will be forgiven?
The amount of principal that may be forgiven is equal to the sum of expenses for payroll, and existing interest payments on mortgages, rent payments, leases, and utility service agreements. Payroll costs include employee salaries (up to an annual rate of pay of $100,000), hourly wages and cash tips, paid sick or medical leave, and group health insurance premiums. If you would like to use the Paycheck Protection Program for other business-related expenses, like inventory, you can, but that portion of the loan will not be forgiven.
When is the loan forgiven?
The loan is forgiven at the end of the 8-week period after you take out the loan. Borrowers will work with lenders to verify covered expenses and the proper amount of forgiveness. What is the covered period of the loan? The covered period during which expenses can be forgiven extends from February 15, 2020 to June 30, 2020. Borrowers can choose which 8 weeks they want to count towards the covered period, which can start as early as February 15, 2020.
How much of my loan will be forgiven?
The purpose of the Paycheck Protection Program is to help you retain your employees, at their current base pay. If you keep all of your employees, the entirety of the loan will be forgiven. If you still lay off employees, the forgiveness will be reduced by the percent decrease in the number of employees. If your total payroll expenses on workers making less than $100,000 annually decreases by more than 25 percent, loan forgiveness will be reduced by the same amount. If you have already laid off some employees, you can still be forgiven for the full amount of your payroll cost if you rehire your employees by June 30, 2020.
Am I responsible for interest on the forgiven loan amount?
No, if the full principal of the PPP loan is forgiven, the borrower is not responsible for the interest accrued in the 8-week covered period. The remainder of the loan that is not forgiven will operate according to the loan terms agreed upon by you and the lender.
What are the interest rate and terms for the loan amount that is not forgiven?
The terms of the loan not forgiven may differ on a case-by-case basis. However, the maximum terms of the loan feature a 10-year term with interest capped at 4 percent and a 100 percent loan guarantee by the SBA. You will not have to pay any fees on the loan, and collateral requirements and personal guarantees are waived. Loan payments will be deferred for at least six months and up to one year starting at the origination of the loan.
When is the application deadline for the Paycheck Protection Program?
Applicants are eligible to apply for the PPP loan until June 30th, 2020.
I took out a bridge loan through my state, am I eligible to apply for the Paycheck Protection Program?
Yes, you can take out a state bridge loan and are still be eligible for the PPP loan.
If I have applied for, or received an Economic Injury Disaster Loan (EIDL) related to COVID19 before the Paycheck Protection Program became available, will I be able to refinance into a PPP loan?
Yes. If you received an EIDL loan related to COVID-19 between January 31, 2020 and the date at which the PPP becomes available, you would be able to refinance the EIDL into the PPP for loan forgiveness purposes. However, you may not take out an EIDL and a PPP for the same purposes. Remaining portions of the EIDL, for purposes other than those laid out in loan forgiveness terms for a PPP loan, would remain a loan. If you took advantage of an emergency EIDL grant award of up to $10,000, that amount would be subtracted from the amount forgiven under PPP.
Dan Reitz | IOGA Lobbyist
Federal: The U.S. Senate passed H.R. 748, the Coronavirus Aid, Relief, and Economic Security Act or the ‘‘CARES Act,’’ the nearly $2 trillion negotiated legislation responding to the coronavirus pandemic and effects on the economy. The House is scheduled to pass the legislation on Friday.
Some Highlights: The legislation continues to provide direct payments to individuals and families, over $350 billion in financial support for small business and additional financial assistance including direct grants through the Small Business Administration, and at least $454 billion of a $500 billion fund for any U.S. businesses, states, or cities for loans and loan guarantees under a new program administered by the U.S. Treasury and lending flexibilities established by the Federal Reserve. The legislation added specific oversight to this fund under an Inspector General appointed specifically for the purpose of auditing the relief funding. Additional specific relief within the $500 billion authorization provides $29 billion to passenger and cargo airlines and $17 billion for industries necessary to national security. The legislation provides over $200 billion in financial aid to local governments, $100 billion in financial assistance to hospitals, and another nearly $340 billion in funding for federal agencies.
There are a number of tax provisions in the legislation that will be of interest:
Section 2302. Delay of payment of employer payroll taxes – This provision allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees for the rest of the year.
- Employers generally are responsible for paying a 6.2-percent Social Security tax on employee wages. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021, and the other half by December 31, 2022.
Section 2303. Modifications for net operating losses – This provision relaxes the limitations on a company’s use of losses.
- Net operating losses (NOL) are currently subject to a taxable-income limitation, and they cannot be carried back to reduce income in a prior tax year. The provision provides that an NOL arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. The provision also temporarily removes the taxable income limitation to allow an NOL to fully offset income. These changes will allow companies to utilize losses and amend prior year returns, which will provide critical cash flow and liquidity during the COVID-19 emergency.
Section 2304. Modification of limitation on losses for taxpayers other than corporations – This provision modifies the loss limitation applicable to pass-through businesses and sole proprietors, so they can utilize excess business losses and access critical cash flow to maintain operations and payroll for their employees.
Section 2305. Modification of credit for prior year minimum tax liability of corporations – This provision allows companies to accelerate the timing to claim prior years AMT credit.
Section 2306. Modification of limitation on business interest – This provision temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns, by increasing the 30-percent limitation to 50 percent of taxable income (with adjustments) for 2019 and 2020.
- As businesses look to weather the storm of the current crisis, this provision will allow them to increase liquidity with a reduced cost of capital, so that they are able to continue operations and keep employees on payroll.
Section 2301. Employee retention credit for employers subject to closure due to COVID-19 – This provision provides a refundable payroll tax credit for 50 percent of wages paid by certain employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. The credit is based on qualified wages paid to the employee. For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020, through December 31, 2020.
As of 3/26/2020
Dan Reitz | IOGA Lobbyist
The Illinois House has canceled session for the week of March 30. Committee deadline for House bills has been extended to April 24. 3rd reading deadline for House bills is now set for May 8. The Senate is following the same schedule. Both chambers were scheduled to be off the next two weeks. Legislators were told to be available in case they need to come back into session. Most legislators I have spoken to expect further cancellations.
The deadline for filing state taxes has been extended to July 15 to match the federal filing deadline.
As of 3/26/2020
This information is correct as of 3/23/2020
Anyone interested in applying for this program will apply directly with the SBA. This loan program is NOT being funneled through Banks like the typical SBA 7A or SBA 504 loan programs are.
Click here to download the presentation from SBA representatives that explains the program and provides some guidance on how to apply. Click here for a quick 3-step overview of the process.
Below is a list of required documents that SBA will ask to be provided with your application for the Disaster Loan Program.
The following documents are required to process an SBA Disaster Loan Application and reach a loan decision. Your SBA Loan Officer and Case Manager will assist you to ensure that you submit the proper documentation. Approval decision and disbursement of loan funds is dependent on receipt of your documentation.
- Business Loan Application (SBA Form 5) completed and signed by business applicant.
- IRS Form 4506-T completed and signed by Applicant business, each principal owning 20% or more of the applicant business, each general partner or managing member and, for any owner who has more than a 50% ownership in an affiliate business. (Affiliates include business parent, subsidiaries, and/or businesses with common ownership or management).
- Complete copies, including all schedules, of the most recent Federal income tax returns for the applicant business; an explanation if not available.
- Personal Financial Statement (SBA Form 413) completed, signed and dated by the applicant (if a sole proprietorship), each principal owning 20% or more of the applicant business, each general partner or managing member.
- Schedule of Liabilities listing all fixed debts (SBA Form 2202 may be used).
- Complete copies, including all schedules, of the most recent Federal income tax returns for each principal owning 20% or more of the applicant business, each general partner or managing member, and each affiliate when any owner has more than a 50% ownership in the affiliate business. Affiliates include, but are not limited to, business parents, subsidiaries, and/or other businesses with common ownership or management.
- If the most recent Federal income tax return has not been filed, a year-end profit and loss statement and balance sheet for that tax year is acceptable.
- A current year-to-date profit and loss statement (typically within 90 days)
- Additional Filing Requirements (SBA Form 1368) providing monthly sales figures.
This information is correct as of 3/23/2020
COVID-19 and Unemployment Benefits
Unemployment benefits may be available to some individuals whose unemployment is attributable to COVID-19. IDES recently adopted emergency rules to try to make the unemployment insurance system as responsive to the current situation as possible.
What is Unemployment Insurance (UI)?
In general, UI provides temporary income maintenance to individuals who have been separated from employment through no fault of their own and who meet all eligibility requirements, including the requirements that they be able and available for work, register with the state employment service and actively seek work. Click here for more information.
If an employee receives unemployment benefits as a result of COVID-19, will the employer’s unemployment contribution rate increase?
At this time, no further guidance has been issued. Until such time, normal procedures will be followed. In general, the contribution rate of an experience rated employer is based, in part, on the amount of unemployment benefits paid to the employer’s former employees.
Potential Closure or Layoff
Rapid Response Services are available to employers who are planning or have gone through a permanent closure or mass layoff at a plant, facility, or enterprise, or a natural or other disaster, that results in mass job dislocation. The State Dislocated Worker Unit coordinates with employers to provide on-site information to workers and employers about employment and retraining services designed to help participants retain employment when feasible, or obtain re-employment as soon as possible. For more information, visit Rapid Response Services for Businesses or contact your local Illinois workNet Center.
This information is correct as of 3/25/2020
The Illinois Department of Commerce and Economic Opportunity is working to provide emergency assistance programs for Illinois small businesses. Click here for the current status of the plan initiatives.
IL 2019 Taxes:
The Illinois due date for individuals, trusts, and corporations to file and pay taxes has been extended to match the federal due date of July 15, 2020. This relief is automatic, an extension does not need to be filed. See the attached bulletin for details.
Illinois has not extended first quarter estimated taxes for 2020 for calendar year taxpayers, that due date remains 4/15/2020. The second quarter calendar year estimate is due 6/15/2020.
With the drop in the price of oil, operators may feel compelled to completely shut down operations as to a particular lease. This could prove to be a risky proposition. An IlJinois Appellate Court decision in 2003 stated as follows with respect to the cessation of operations and the status of the lease:
“One of the reasons offered for the defendants’ failure to run the pumps and produce oil was the depressed price of oil. Though a depressed market may have rendered it unprofitable to operate the lease, it did not prevent the operation of the wells. We have reviewed the lease and have found no provision excusing production and marketing in the event that the oil market becomes depressed. The depressed price of oil was not contracted against. Consequently, it cannot be used to justify nonproduction, and it does not prevent a lapse of the lease where production has been shut down.”
The terms of the operative lease should be carefully reviewed to determine any language that addresses cessation of operations and production. Many of the lease forms provide that if the operations are not resumed within a certain number of days, the lease could terminate.
The fact that the wells on a lease are the subject of temporary abandonment status will not excuse the absence of operations and production for purposes of perpetuating the lease.
Before completely ceasing operations as to a lease, the lease provisions should be carefully reviewed. Do not place yourself in a position where it could be argued that the lease has terminated.
Consult with your attorney as to this issue and be cognizant of the minimal operations and production required to perpetuate your lease.