Finding sources of working capital is of utmost importance for many Chicago area businesses impacted by COVID-19. While much of the media attention has focused on Small Business Administration (SBA) loan programs such as Economic Injury Disaster Loans (EIDL) and the Paycheck Protection Program (PPP), there are other local loan programs to consider. This includes the Chicago Small Business Resiliency Fund, Small Business COVID-19 Relief Fund, and even Charitable Trust Grants.
The various options are certainly useful for struggling businesses and there is yet another loan program for Illinois companies to consider, the Illinois Small Business Emergency Loan Fund. This loan program is designed to provide businesses with a working capital infusion to manage payroll and other expenses. To help clients, prospects, and others, Selden Fox has provided a summary of key details below.
Eligibility Requirements
There are various eligibility requirements that must be met in order to qualify for this Emergency Loan, including the following:
- Only businesses that have generated less than $3 million in gross revenue during 2019 and employees less than 50 people are eligible to apply. To determine the employee threshold, employee count is based on average employment between October 2019 to December 2019. In the case of a seasonal business, the employee count will be based on average employment for 2019.
- A business must have been adversely impacted by the COVID-19 pandemic. This means the business must have experienced at least a 25% decrease in revenue. This is determined by the average monthly revenue from January 2020 to March 2020 or the four-week period prior to application submission.
- The business must be located in Illinois and provide proof of an Illinois address and a valid state business license.
- Only businesses that have been in operation for one year or longer may apply.
- Not-for-profit organizations and farm businesses are eligible to apply assuming they do not qualify under the USDA’s farm loan program.
While not an eligibility requirement, it is important to note that applications must include copies of bank statements starting in October 2019 to the current period and copies of the business’ most recent state and federal tax returns.
Loan Terms
The loan has a five-year term loan with an interest rate of 3%. Recipients can defer payments for up to six months when both interest and fixed principal payments will be due. Since there are no pre-payment penalty so businesses may repay the loan early. The loan amount is determined by average monthly revenues prior to the COVID-19 emergency. However, the maximum amount which a borrower can receive is $50,000. Finally, loan funds must be used for working capital with at least 50% applied towards payroll or other compensation expenses. Borrowers are also required to commit to hire or retain at least 50% of their workforce for a period of six months.
The loan usage requirements are important to note because they differ from the PPP. Under the federal program, borrowers are required to spend at least 75% of funds on payroll and benefit expenses. However, this program provides more flexibility in loan usage which may make it more attractive to potential borrowers.
Loan Timeline
The unfortunate reality is some businesses are not able to wait an extended period for approval and funding. While there is no guarantee on when loans will be approved, it is important to submit the application as soon as possible. Lenders are working quickly to process loans while the State has continued to add lenders to the program.
** With the ever evolving changes of the COVID-19 stimulus opportunities, please refer to our Response to COVID-19 page for the most up to date information. Please contact us if you have specific questions. **
Contact Us
The Illinois Small Business Emergency Loan Fund provides an opportunity for companies in need of additional funds. It creates another option for companies that should not be overlooked. If you have questions about the information outlined above or need assistance with a COVID-19 tax or business planning issue, Selden Fox can help. For additional information call us at 630.954.1400 or click here to contact us.
