Help for Small Businesses in the Age of COVID-19

Help for Small Businesses in the Age of COVID-19

As a result of the recent Coronavirus outbreak and the public health safety measures it has led to, small businesses across the nation are experiencing severe financial trouble, struggling to keep their operations running and their workers employed. The National Restaurant Association wrote in a letter to the president stating that it foresees sales losses of up to $225 billion in the next several months and the potential loss of 5–7 million jobs. Of course, the food service industry is but one sector; the overall economic impact on small businesses will likely be far greater.

Luckily, various programs have recently been instituted by both governmental and private entities to respond to the losses that small businesses are already starting to see. Below are the key emergency aid programs of which small businesses in Illinois can avail themselves.

CITY OF CHICAGO

The City of Chicago has recently announced it has formed a fund to provide financial relief to small businesses in the city. The Chicago Small Business Resiliency Loan Fund (the “Resiliency Fund”) will allocate aid to Chicago small businesses that are in financial stress, such as those struggling to make payroll. This emergency aid will be provided in the form of low-interest loans. The Resiliency Fund is a product of a public-private partnership that has amassed a reservoir of $100 million for needy area businesses.

Any funds provided must be used as “working capital,” with at least half to be earmarked for payroll and other means of maintaining the business’ workforce at 50% of its pre-COVID-19 level. To qualify, a business must satisfy the following requirements:

  • Experienced a decrease in revenue of at least 25% as a result of the Coronavirus outbreak
  • Employs less than 50 employees
  • Had a City of Chicago business address or a City business license
  • Had a gross revenue of less than $3 million in 2019
  • Has no tax liens or legal judgments against it

The Resiliency Fund will provide loans up to $50,000, to be repaid within a 5-year period. Business owners interested in benefitting from the Resiliency Fund can fill out an interest form here. Formal applications will open on March 31. The City will release information about how to apply before that date.

STATE OF ILLINOIS

The State of Illinois at first attempted to get its small businesses deemed eligible to receive federal emergency aid (see below). After that was successful, on March 25, 2020, the State announced that it would also be offering State-funded emergency assistance to small businesses in excess of $90 million, in the form of three distinct programs.

The Illinois Small Business Emergency Loan Fund will offer low-interest loans up to $50,000 to small businesses in any sector outside the City of Chicago (Chicago businesses can apply to the Resiliency fund mentioned above). This program was borne out of a partnership among two State agencies—the Illinois Department of Commerce and Economic Opportunity (DCEO) and the Illinois Department of Financial and Professional Regulation (IDFPR)—and several non-governmental groups: Accion (see “Non-Profit Loan Providers” below), the Illinois Bankers Association, and the Community Bankers Association of Illinois. The fund is able to offer up to $60 million total, made possible by a $30 million loan loss reserve. The reserve was established with $20 million from the DCEO and $10 million obtained with the help of Illinois banking institutions. Businesses can apply if they have fewer than 50 employees and less than $3 million in 2019 revenue. If awarded a loan from this program, businesses will have no repayment obligations for 6 months, after which they will make payments at 3% interest until the end of their 5-year loan term. Applications will be available on DCEO's website.

The Downstate Small Business Stabilization Program will offer working capital grants up to $25,000 to small businesses in suburban and rural counties across Illinois that are served by DCEO's Office of Community Development. This $20 million program will be funded by repurposing Community Development Block Grant funds, allowing small businesses with up to 50 employees to partner with local governments to obtain the grants. Communities that receive direct financial help from the federal Department of Housing and Urban Development (HUD) will not be eligible for this program. Applications will also be available on DCEO's website.

The Hospitality Emergency Grant Program will offer grants up to $25,000 to bars and restaurants, and up to $50,000 to hotels. The funds can be used for working capital, job training, and technology to support modifying operations in light of the COVID-19 pandemic. Bars and restaurants can apply for up to $10,000 if they generated less than $500,000 in 2019 revenue, but they may apply for up to $25,000 if they generated between $500,000 and $1 million in 2019 revenue. Hotels may receive up to $50,000 if they generated less than $8 million in 2019 revenue. This program offers a total of $14 million in grants, formed by repurposing job training and tourism promotion funds. These grants will be administered by Accion Serving Illinois and Indiana on behalf of the DCEO. Applications are already available on DCEO's website and are due by April 1, 2020 at 5:00 p.m. Applicants will be entered into a lottery, and winners will be notified on April 4th.

Illinois also routinely offers non-emergency small business loans; more information on them can be found here. Information about general assistance for small businesses in Illinois can be found here.

The Illinois Department of Revenue (IDOR) has recently instituted a late sales tax payment forgiveness program specific to food- and drink-related businesses. The IDOR has decided to waive all penalties and interest associated with late sales tax payments. Click here to learn more about the program and how you can request relief.

Businesses can also consult the network of Illinois Small Business Development Centers throughout the State. These centers provide business consulting, training, and other resources to start-ups and established small businesses. Most of them will provide financial guidance as part of their services.

FEDERAL GOVERNMENT

The U.S. Small Business Administration (SBA) routinely offers a variety of loans to small businesses. The SBA also administers the Economic Injury Disaster Loan Program, which is specifically tailored to help businesses, renters, and homeowners during a crisis. This program provides low-interest working capital loans to small businesses and non-profits—up to $2 million—to help cover debts, payroll, accounts payable, and other bills. These SBA loans carry an interest rate of 3.75% for small businesses and 2.75% for non-profits. The repayment term for these loans varies by applicant but is capped at 30 years.

FACEBOOK

Social networking giant Facebook announced that it would be offering emergency aid to small businesses as well. Facebook will offer $100 million to as many as 30,000 small businesses in 30 countries in which Facebook operates. These funds will function as cash grants, not loans, and can be used to cover rent, payroll, general operations, and more. But this aid program will not only provide cash. As part of its monetary package, it will provide the unique benefit of cost-free digital advertising in the form of advertising credits. Learn more about the program here and sign up near the bottom of the page to receive updates. Facebook also provides a Business Resource Hub found here.

NON-PROFIT LOAN PROVIDERS

In addition to government and private loan providers, there are a variety of non-profit providers. They usually have a specific focus or are community-based. Accion tends to help businesses that are having trouble finding loans, in part by offering more modest loans and looking at a variety of factors. The Women’s Business Development Center provides similar services for women-owned and operated entities. Find additional resources for small loan providers in Chicago here.

BANKING INSTITUTIONS

Some banks may be willing to work with small business customers facing hardship. Capital One, Citi, and Wells Fargo have stated that they are committed to responding to their customers’ needs during the current crisis. Capital One has encouraged its customers “who may be impacted or need assistance to reach out” so that Capital One can help develop a solution. Citi has decided to waive monthly service fees and remote deposit fees for its small business customers for 30 days; it will also waive penalties for early CD withdrawal and is making its bankers available after hours and on weekends.Wells Fargo donated $6.25 million to the relief effort and affirmed that it is “committed to helping customers experiencing hardships related to COVID-19.”

INSURANCE CARRIERS

Some company insurance plans provide business interruption (BI) coverage. BI is meant to supplant business revenue lost as the result of a disaster. Businesses may have included BI coverage as part of their policy or as an add-on or rider. While it is not likely that a BI claim made on the basis of COVID-19’s impact will be successful, a small business can always file and see what the insurance carrier says.

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We will be updating this information as new resources become available. And while there are a variety of programs listed above, be sure to subscribe to newsletters and news alerts about additional programs that might be offered. You will want to take as many avenues as possible to protect your business and your workers in this uncertain time.

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